Singapore Exchange (SGX) is building up its bulk commodity product offerings with nine more derivative contracts over the next two months, subject to regulatory approval.
These new contracts will further boost and complement the existing AsiaClear products to provide customers with access to more effective, efficient and comprehensive risk management.
Taking into account the evolving regulatory requirements, SGX aims to introduce options-on-futures for Iron Ore and Freight by June 2014.
In addition, SGX intends to enhance its flagship Iron Ore and Steel complex with Coking Coal derivatives based on key export and import price indices in July 2014.
SGX will bolster its existing suite of Asian thermal coal derivatives with API 4 and API 5 to capture seaborne coal prices exported from South Africa and Australia respectively in July 2014. These new thermal coal indices, along with the existing API 8 and IHS McCloskey Indonesian Sub-Bituminous Coal, will cover all the key thermal coal price benchmarks with Asian centricity.
The new contracts are designed to reflect major physical commodity flows so as to cater to the needs of producers as well as consumers in the Asian bulk commodities market. With the bulk commodities value chain available for hedging and trading on a single platform in the Asian time zone, SGX offers significant margin savings and operational efficiencies.
In addition to the existing range of futures, SGX will introduce options-on-futures for iron ore and freight. These options on futures will be fully fungible with their corresponding options-on-swaps.
Coking coal is the other key raw material in the production of steel. Representing approximately one-third of the variable cost in steel production, fluctuations in coking coal prices can significantly influence the profitability of steel mills. SGX will be launching Coking Coal Swaps and Futures to complement the existing Iron Ore derivatives and HRC Steel derivatives contracts. Similar to the Iron Ore Derivatives, the Coking Coal derivatives will be based on The Steel Index (TSI) indices.
Asia is both a key producer and key consumer of thermal coal. In particular, China is a key importer followed by India and South-East Asian nations while Indonesia and Australia are key exporting nations of the commodity in the continent.
To serve the needs of the Asian thermal coal market, SGX will expand its current thermal coal product offerings from the existing API 8 and IHS McCloskey Indonesian Sub-Bituminous Coal derivatives, SGX will be listing derivatives based on the API 4 and API 5 indices. The API 4 is the price benchmark for thermal coal exported FOB (free-on-board) from Richards Bay in South Africa; while the API 5 is that exported from Newcastle in Australia.
