Iron ore derivatives forge ahead on Chinese demand
The iron ore derivatives market is setting new volume records fuelled by higher volatility and increased involvement from Chinese participants. Although financial players are waiting for liquidity to achieve critical mass, dealers say iron ore has the potential to become one of the world’s largest commodity derivatives markets
Activity in the Asian iron ore derivatives market is at all-time highs, driven by the emergence of China as the world’s largest consumer of the commodity. In the two years since global mining giants BHP Billiton, Vale and Rio Tinto forced steel makers to abandon the traditional annual pricing standard in order to benefit from rising spot prices, iron ore consumers and intermediaries have made increasing use of over-the-counter and futures markets to buy protection against rising volatility.
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