SGX expands footprint in metals and minerals such as green steel and lithium
Singapore Exchange (SGX Group) considers India a key stakeholder in its fast-financialising iron ore contract, as well as a key participant in its suite of commodity contracts offering proxy access to fast industrialising Asia.
SGX Group is already offering iron ore and rubber derivative contracts among others, linked to the ever-growing demand for commodities in China, with increasing participation from Indian companies hedging risks from volatile prices. As much as 90% of Indian origin iron ore is exported while rubber remains a critical product for industrial development in India.
Likewise, risk hedging products related to the Indian infrastructure development, green initiatives and Environmental, Social and Governance (ESG) as well as new energy minerals and metals are some of the areas we want to focus on, according to William Chin, Commodities Head at SGX Group.
“We are expanding our footprint in metals and minerals such as green steel and lithium,” Press Trust of India quoted Chin as saying on 16 May.
He noted surging demand from the massive infrastructure development, industrial production and renewable energy-based electric vehicles underpinned by India’s new crown as the world’s most populous nation.
Chin has singled out green steel initiatives, especially based on recycling of scrap and the Government’s emphasis on making the country self-sufficient, or Aatmanirbhar, in new energy, minerals and metals as well as electric vehicles and lithium for batteries.
He believes Indian businesses as a core stakeholder group will play an important role in price discovery of such critical products while the Government continues to drive initiatives such as exploring minerals from the country’s resource rich basins.
The Indian economy at about 8 percent annual GDP growth will create strong demand both from domestic and import sources.
Chin has also pointed out the close relationships SGX Group has built with the financial and business community in India in the past decades and the importance of collaboration with partners and stakeholders to develop solutions to serve participants in both markets.
“We can consider investing in the development of contracts for new minerals in partnerships with Indian businesses, that serves price discovery that is central to Indian trade flows,” said the senior SGX executive, pointing out the open borderless trading through internet-based networks.
India is already implementing regulations and reforms, opening up Indian businesses participation in US dollar dominated trade, especially the GIFT City IFSC hub which is expanding fast with international bankers and business groups setting up offices in Ahmedabad dollar-free zone.
Chin especially highlighted the global nature of SGX’s more than 10-year-old iron ore contract, which while China trade-centric, is a useful reference for the ferrous trade in India as a fast-industrializing nation.
“China and India are globally-respected big markets, and, at SGX, we already have a big and growing network across businesses in the two countries,” PTI reported Chin as saying.
He pointed out the Indian participation in SGX’s iron ore contract, highlighting that daily trade volume of over 161,000 lots were recorded in March 2023 and 156,000 lots in April. Indian participation is currently low but should increase over time as Indian activity is integrated into the global liquidity pool.
“We are very encouraged by this increase in daily iron ore volume by India-based participants and we see it growing multi-fold,” Chin said.
Given the Chinese and Indian trading interests and growing demand for essential materials, over the past decade, SGX has expanded its single forum focused on iron ore to include Steel, Shipping and Coking Coal forums, making it a total network of the Singapore International Ferrous Week (SIFW), in line with its expanded derivatives offering across the entire steel value chain.
The SIFW, to be held May 22-26, 2023, is expected to draw Indian participation on a large-scale, especially steel, shipping and coking coal being main products required in massive scale for the industrial programme for the world’s fastest growing economy, he pointed out.
Chin also sees global experts at the Ferrous week especially specialists on ESG, sustainability and carbon.
“We want to understand how ESG, sustainability and carbon would play roles in future trading of products and materials linked to infrastructure developments and industrialization programmes,” he said.
The ferrous week platform will also have a big delegation from China, after several years of absence due to travel restrictions of COVID-19 among other economic challenges.
There is no doubt that China leads in many sectorial markets especially raw materials and commodities but the Singapore International Ferrous week has evolved into a large global platform for other Asian markets.
SGX is investing in such platforms and new contracts, especially for serving the Asian economies, he added. fiinews.com
