Speech by Mr Lee Yi Shyan, Minister of State for Trade & Industry and Manpower at the Iron Ore Summit organized by the Federation of Indian Mineral Industries (FIMI) on 8 June 2009

Mr Rahul N. Baldota, President, FIMI

Mr Siddharth Rungta, Vice-President, FIMI

Mr H C Daga, Chairman, Standing Committee for Ferrous Minerals & Industries, FIMI

Mr R K Sharma, Secretary General, FIMI

Distinguished Guests, Ladies and Gentlemen

Introduction

Good morning. It gives me great pleasure to be here today at the 6th Iron Ore Summit organized by the Federation of Indian Mineral Industries. We are honored that FIMI has chosen Singapore to hold its Iron Ore Summit this year. This is the first time this Summit being held outside of India and China, and Singapore is very happy to be your host.

FIMI’s annual Iron Ore Summit has traditionally been a platform bringing together representatives from the Indian as well as international iron and steel industry. Against the backdrop of the current economic climate, this year’s Iron Ore Summit presents an excellent opportunity to share and discuss perspectives on the outlook of the iron and steel industry, particularly in the areas of demand and supply, trade and pricing policies, as well as technology and logistics.

Overview of Global Iron and Steel Industry

World crude steel production has witnessed a robust growth over the last four years. From a production level of about 1 billion tons in 2004, it increased to 1.3 billion tons in 2007[1], registering a growth of 26%.This was largely fuelled by the boom in the construction and infrastructure industries in China, Middle East and other emerging economies.

Despite the subsequent global downturn in 2008, Asia - in particular China – and the Middle East continued to show positive growth in 2008. China in 2008 contributed to 38% of the world’s total crude steel, and continues to be the world’s largest importer of iron ore. India is today the third largest supplier of iron ore to China, after Australia and Brazil.

Singapore – the leading trade hub in Asia

The developments of the iron and steel industry certainly spell more opportunities for Singapore as the leading trading hub in Asia. Our strategic location has enabled us to develop an active, dynamic and robust trading industry.

The Approved Oil Trader Programme and Approved International Trader Programme launched in 1989 and 1990 respectively paved the way in encouraging global companies to locate their trading activities in Singapore. Now known as the Global Trader Programme (GTP), there are over 260 international trading companies from a wide range of sectors based in Singapore. Besides being the world’s top bunkering hub, Singapore is also fast becoming a compelling hub for trade in agri-commodities as well as metals and minerals.

Developing Singapore’s metals and minerals sector

A growing cluster of metals and minerals companies

We have observed that the community of international metals and minerals companies in Singapore is gradually building up. The number of metal traders in Singapore reached 41 in 2008, a 4-fold increase from 2001, when the GTP started, and constitutes 15% of all international trading companies present here. These include the world’s top three iron ore miners – BHP Billiton, Rio Tinto and Vale. Others include top Chinese steel companies such as Baosteel and Minmetals.

There is also a rising trend of Indian companies marketing iron ore out of Singapore. Comtrack Pte Ltd for instance, conducts its international marketing of Indian iron ore through Singapore. Similarly, VISA Resources Pte Ltd, the Singapore arm of the Kolkata-based VISA Group, also plans to perform iron ore marketing in Singapore. These companies recognized value in the metals & minerals community present here – they value Singapore’s strong trading infrastructure and ancillary services, as well as our strengths as a gateway to South-east Asia and North Asia. Our strong economic ties with ASEAN and China especially, serve as an added advantage for companies with trading activities in Singapore.

I am heartened to note that many of the metals & minerals companies in Singapore today have moved beyond trading functions to establish significant activities along the business value chain, including marketing, trade finance, shipping, and even shared services operations here. We would like to encourage all companies here to do the same.

Strong trading infrastructure and vibrant supporting ecosystem

As a global business city, Singapore’s well-established trading infrastructure, backed by our financial, logistics and shipping industries, our pro-business environment, political and economic stability, efficient legal system and a highly-qualified workforce, are key pull factors for companies choosing Singapore as the nerve center for their operations in the region.

Our geographical proximity and connectivity to leading iron ore and steel regions such as Australia, China and India are added advantages that reinforce the decision of companies to locate here. In addition, the government, through the Economic Development Board (EDB) and International Enterprise (IE) Singapore, have been assisting companies to interested in undertaking additional activities here. These include using Singapore as a location for headquarter functions, trading, finance and treasury activities, research and development as well as talent recruitment and training..

We are also beefing up our risk management infrastructure via the development of commodity exchanges and clearing facilities in Singapore. For instance, on 27 April, SGX Asia Clear launched the world's first clearing facility for over-the-counter (OTC) iron ore swaps. The contract has attracted strong investor interest and to-date, the volume of trades cleared has crossed US$60 million. The launch represents a key milestone in the development of risk management tools for the OTC iron ore swap market.

Singapore as a technology partner in building a sustainable steel industry

I would also like to share with you Singapore’s interest to promote research & development activities in recycling as well as mineral processing technologies. Of particular relevance is the Minerals, Metals & Materials Technology Centre at the National University of Singapore. The technologies developed in Singapore will have applications in the production, recovery and recycling of steel.

Although there are no mines in Singapore, the concept of rehabilitation is important to a city-state like Singapore. For example, lessons and processes from the restoration work carried out at our Pulau Semakau landfill could be even re-applied to mine rehabilitation. In short, Singapore can be your potential partner in the development of a sustainable steel industry.

Conclusion

Many scholars believe the 21st century belongs to Asia. As the Dean of the Lee Kuan Yew School of Public Policy, Kishore Mahbubani[2], puts it – the West has so dominated world history for the last 200 years that we forget that from year 1 to the year 1820, the two largest economies in the world were India and China.

In 2003, a study by Goldman Sachs confidently predicted that by 2050, the four largest economies in the world will be China, the US, India and Japan – in that order. A more recent evaluation however, noted that this could happen sooner and that the Indian economy could surpass that of the US by 2043.

Economist and former US Treasury Secretary Lawrence Summers said that while the standard of living rose at a rate of about 50% during a person’s life span during the Industrial Revolution, Asia’s current growth rate represents an unprecedented 100-fold (that is, 10,000%) rise in standards of living during one lifetime.

It is no wonder that the world is turning its attention to Asia. Intra regional trade and dependence will grow. We will need new hubs and centers to support the new Asian era and increasing flow of goods and services. Let us work together to build a vibrant and prosperous future.

I wish you all a fruitful and rewarding discussion. Thank you!

[1] Source: http://www.worldsteel.org/?action=newsdetail&id=257
[2] Ringing in the Asian century - http://articles.latimes.com/2008/feb/19/opinion/oe-mahbubani19