It is reported that the volume of iron ore swap contracts cleared on the Singapore Exchange in May 2012 surged to another all time high, exceeding the previous record set in October 2011.

 

According to an SGX NewsFlash, over 7.67 million tonnes of swaps (with a nominal value of over USD 1 billion) were cleared during May 2012, representing an increase of 122% on the same month of 2011. SGX uses exclusively The Steel Index 62% Fe iron ore fines reference price for settlement of its iron ore swap contracts.

 

The volume of open interest on SGX also reached a new all time high, peaking on May 30th 2012 at over 7 million tonnes for the first time since the contract was launched in 2009. Month end open interest was also a record, standing at 12,375 lots (6.18 million tonnes).

 

TSI's iron ore index is also used for the settlement of swaps and options on four other clearers worldwide, namely LCH.Clearnet, CME Group, NOS Clearing and the Indian Commodity Exchange. Volumes cleared on these platforms in May 2012 have yet to be confirmed.

 

Mr Oscar Tarneberg, TSI's Senior Iron Ore Analyst, based in Shanghai noted that "The increase in swaps trading went hand in hand with a marked pickup in physical activity. TSI's iron ore prices are widely used in index linked physical contract price arrangements between miners, traders and Chinese steel mills. Some big price moves through the month and large hedges on the nearby months by major trading houses contributed to higher volumes."

 

Iron ore prices in May 2012 trended downwards for most of the month, as Chinese steel mills ran down their inventories, before showing some gains over the final week. TSI's 62% Fe reference price ended the month at USD 134.80 per tonne CFR Tianjin port, having dipped to a 6-month low of USD 129.90 per tonne on May 23rd 2012, some 11% below the price on the first day of the month and the lowest level seen since early November 2011. Despite the late uptick, the May 2012 figure of USD 136.27 per tonne is the lowest monthly average since November 2011.

 

Since their launch, more than 124 million tonnes of iron ore derivatives have been cleared basis TSI, with a nominal value of over USD 18 billion. This includes over 10 million tonnes of options, which have seen a strong growth in liquidity over the past year. 95% of all iron ore contracts cleared since launch has used TSI's prices for settlement.（Source：SteelGuru)