Singapore Iron Ore Week: Industry calls for high-grade iron ore derivatives

SINGAPORE, May 24 (SMM) – The demand for a new derivatives contract on higher grade iron ore has become more prevalent as price spreads among various grades deviate from historical norms, said Andrew Glass, head of ferrous trading at Anglo American.

“Our primary concern is managing our risks and at the moment we carry risks inherent in high grade premiums,” he told delegates at the Singapore Iron Ore Forum on Thursday May 24.

“Having a 65% Fe [iron ore] contract would allow us to manage that,” he added. "It would be beneficial for the industry if the SGX has such a contract."

Anglo American’s iron ore products are categorised as high-grade materials with an Fe content above 64%.

Glass said that the need for high-grade derivatives contract is greater as there are currently limited ways to express opinions on quality differentials.

As China continues to push environmental protection and as steel mills maximise productivity amid high margins, higher grade iron ore now commands higher premiums over the benchmark 62% Fe materials.

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