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    October 7, 2014

    Low Iron Ore Spot Prices Spark Surge in Futures

    Written by Sandy Williams

    The collapse of spot iron ore prices resulted in a surge in iron ore swaps, options and futures in September. Options hit the highest ever volume at 15.6 million tonnes followed by futures at 25 million tonnes according to TSI data. In total, over 62 million tonnes of futures and derivatives were cleared by exchanges outside of China in September. Regulatory pressure has driven the use of futures over use of swaps.

    The peak derivatives trading was in July 2014 with 57 million tonnes cleared through the Singapore Exchange (SGX) and Mercantile Exchange Group (CME). Trading volumes decreased as spot prices for 62% Fe iro ore fines retreated in price to around US$90-100/dry metric tonne CFR Tianjin. As prices fell below US$90 at the end of August it triggered a fresh surge in trading as traders sought to protect themselves from losses.

    Sandy Williams

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