The Singapore Exchange said on Thursday that it will launch new high-grade iron ore derivatives in December, aiming to tap into a growing appetite for higher quality supplies of the steelmaking raw material.
China's anti-pollution campaign has forced steelmakers in the world's top producer to shift to higher grade iron ore to curb emissions, in a boon for top supplier, Brazilian mining giant Vale.
SGX said that the futures and swaps contracts will reference the Brazilian ore fines with 65 percent iron content index from commodity price provider Fastmarkets MB.
"Increased use of high-grade iron ore as China pursues environmentally friendly growth is creating demand for a new risk-management tool to help market participants better manage widening basis risks," the exchange said.
It would be the first high-grade iron ore derivatives in the market where the typical derivative references the index prices based on ore fines with a 62 percent iron content.
SGX is the world's second biggest marketplace for iron ore derivatives in terms of volume after China's Dalian Commodity Exchange. Iron ore derivatives traded on SGX, including futures and options, reached 9.3 million contracts in January to September, equivalent to 932.2 million tonnes.
During the same period, volume traded on iron ore futures in Dalian reached 197.1 million contracts, or 19.7 billion tonnes.
(Reporting by Manolo Serapio Jr.; Editing by Christian Schmollinger)