Singapore Mercantile Exchange (SMX), the first pan-Asian multi-product commodity and currency derivatives exchange, announced that the world’s first Iron Ore Futures Contract on a global platform, settled based on the Metal Bulletin Iron Ore (MBIO) Index will be launched August 12, 2011. Metal Bulletin’s MBIO index is a reflection of the seaborne merchant market for sinter fines delivered to China.
The futures contract will complement Singapore as a major trading center of iron ore and will be an ideal hedging tool for smaller exporters, traders and importers. The physical market for iron ore is valued at about $ 200 billion a year, making it second only to the market for crude oil. China alone accounts for more than $ 100 billion of this market, with production at 250 million metric tons (mt), based on equivalent grade 62% Fe) and imports of 619 million mt.
The Metal Bulletin Iron Ore (MBIO) Index utilizes daily price data of actual transactions on a CFR China spot basis received by Metal Bulletin from a broad spectrum of industry participants, including leading independent Chinese steel consultancy and data provider Shanghai Steelhome’s, which has widespread contact base of steel producers and iron ore traders across China. The MBIO Index is a tonnage-weighted calculation of actual physical transactions, normalized to 62% Fe, CFR Qingdao and is published daily at mid-day London time.
“Based on the unique contract design of smaller trading unit, optimal tick size and monthly single day expiry, the physical players of all sizes across the supply and value chain of iron ore can participate in the SMX MBIO Index futures contract for effectively covering their price and counterparty risk,” said V. Hariharan, interim CEO, SMX.
SMX, which went live August 31, 2010, has seen its membership number double over the past 11 months crossing 50. The exchange had started with 25 members and four contracts and today has more than 50 members including seven clearing members and 11 contracts.