LME WEEK: Iron Ore Swaps Trading By Producers To Grow - LCB
2011年10月7日 - 1:10AM
Dow Jones News
The involvement of large iron ore producers in the iron ore
swaps market is set to grow, although they are unlikely to become
major players in the derivatives markets, the chief executive of
London Commodity Brokers told Dow Jones Newswires.
"We will see more of them than at the moment, but I doubt
they'll be dominant players," Clive Murray said in an interview
during the London Metal Exchange's annual industry week. "Whether
they come in and dominate swaps, I doubt it. Each mining house
wants to be a bit more flexible than the next, and they don't want
to be seen influencing the market. They have to please
shareholders," he added.
An iron ore swap is a cash-settled derivative contract that
involves buying or selling at a fixed price against a floating
price, like an index. Swaps can be used by mining companies, steel
producers and other market participants to hedge against volatility
in the physical iron-ore spot market.
However, the financial products, which were pioneered by Credit
Suisse (CS) and Deutsche Bank AG (DB) a couple of years ago,
initially struggled with low liquidity and have seen a slow uptake
from large iron ore producers.
London Commodity Brokers, an over-the-counter brokerage firm
that specializes in physical and derivatives broking of commodities
such as coal and iron ore, has sent brokerage bills to over 40
different entities in the past three years, including 13 different
banks and producers such as Glencore International PLC (GLEN.LN)
and BHP Billiton Ltd (BHP), according to Phil Simms, manager of
London iron ore swaps for London Dry Bulk, the company's iron ore
arm.
"New people are coming to the table when they see other players
getting involved," said Simms. "Because there are more players
there is more liquidity, and more confidence even at far end of the
curve. People can now trade years ahead," said Simms.
While banks played a big part in the early adoption of iron or
swaps, London Commodity Brokers is also seeing increasing interest
from European and Asian traders, said Simms.
Activity is growing apace, and open interest in iron ore swaps
on the Singapore Exchange (SGX) hit a new record high of 9,799
lots, or 4.9 million tons in September, according to The Steel
Index, one of several information providers that generates indexing
for iron ore prices. Trading volumes in iron ore derivatives were
strong in September, with over 4.3 million tons cleared for the
third consecutive month. This took the total volume cleared in
third quarter of this year to over 15 million tons, according to
TSI.
-By Francesca Freeman, Dow Jones Newswires; +44 (0)20 7842 9412;
francesca.freeman@dowjones.com