“Navigating the New Normal – Emerging Trends and Opportunities”

Distinguished Guests,

Ladies and Gentlemen,

 

Introduction

1. Good morning. It gives me great pleasure to join you at the 4th Singapore Iron Ore Forum (SIOF). This annual forum is a platform where market leaders and industry experts converge to consider the latest developments in the iron ore and steel industry. Your active participation in the forum is testament to the value and success of the Singapore Iron Ore Forum as a cornerstone event of the global iron ore and steel industry.

 

Singapore’s growth as a metals and minerals trading hub

2. The Singapore metals and minerals trading hub has grown from its humble beginnings with just a few companies, to today’s vibrant community of 120 global traders. Over the years, we have built up a strong trading ecosystem that has attracted top metals and minerals companies who have anchored key strategic functions (such as treasury, logistics, HR, financing and risk management) in Singapore. For instance, Tata International recently announced their plans to consolidate their global minerals and agri-commodities verticals here. They cited the “availability of experienced traders, low-cost finance & structured financing tools, high concentration of bulk shipping, and an efficient infrastructure for running a business” as key reasons behind their decision to locate their strategic functions in Singapore. We welcome these developments which should also encourage more global traders in the metals and minerals industry to anchor your core business activities here.

 

Accessing opportunities amidst global uncertainty

3. Notwithstanding these positive developments, the metals and minerals industry will continue to face challenges in 2016. Iron ore prices are gradually easing from the spike observed in first quarter of this year which was driven in part by stronger than average demand sentiments from the Chinese mills. The uncertainty is likely to persist in the near term as the market seeks to rebalance itself. Against this backdrop, minerals trading hubs like Singapore can continue to play a key role in a few ways to help traders access opportunities in this industry.

4. First, traders can continue to leverage the growing number of counterparties across the iron ore and steel value chain in Singapore to better manage the challenges from such volatility. Today, over 70% of top metals & mining companies, and over 60% of the world’s top 30 steel companies are based here. This provides critical market intelligence that can inform decisions, and allow market players to build relationships with different participants along the supply chain (suppliers, buyers, logistics, and financial service providers) to understand their needs and create value.

5. Second, traders can leverage the suite of risk management tools to hedge price risks via derivative contracts. Singapore is currently the clearing center for over 90% of globally traded iron ore derivatives. In 2015, the utilisation of the Singapore Exchange (SGX)’s total iron ore derivatives volume increased by 83% year-on-year to 1.1 billion tonnes. There has also been good uptake of SGX’s new risk management products such as the world’s first iron ore lump derivative contracts that was launched last year. This product helps to minimise businesses’ exposure to the price and premiums of iron ore lumps – a previously unhedgeable risk. To date, over 4.1 million tonnes of iron ore lumps have been traded on SGX.

6. Third, our strong legal regime with efficient arbitration processes enables trading companies to effectively manage counterparty transactions. According to the World Bank’s 2016 Doing Business Report, Singapore was ranked first on the ease of enforcing contracts. The Singapore International Commercial Court (SICC), which was launched last year, will further provide a neutral court-based platform for the resolution of international commercial disputes. This helps traders mitigate the risks of holding assets out of Singapore, and gives them the confidence to invest in key infrastructure and capabilities from here.

7. Last but certainly not least, we have a strong pool of highly skilled and adaptive talent to support the growth of the commodities trading sector. Last year, IE Singapore launched the International Trading Programme (ITP) with the Nanyang Technological University. The ITP is aimed at grooming undergraduates with both business and technical knowledge through training in: (i) geology and metallurgy, (ii) derivatives securities, as well as (iii) trade finance and incoterms. To date there are 11 international industry partners[i] who are participating in this programme, many of whom are from the metals sector. We encourage more industry partners to come on board with this programme.

 

Critical infrastructure for the next phase of growth

8. In the longer term, we need to create the infrastructure essential to strengthen Singapore’s position as a global trading hub. Alongside the growth of global trade, there has been growing demand for the electronic transmission of trade documents to ensure efficient information transfer. This is why companies like BHP Billiton have already taken the lead to shift part of its trade-related documents onto electronic platforms.

9. At this year’s Budget, the Singapore Government announced that we are developing the National Trade Platform or NTP. The NTP will be a one-stop information platform for the trade and logistics sector, as well as adjacent

sectors in trade finance. By enabling digital information exchange, companies will be able to share and re-use secure documents with business partners and the government seamlessly. Traders will be able to tap on an expanded international network to facilitate collaboration and unlock new business opportunities.

 

Conclusion

10. Finally, I would like to congratulate SGX on AsiaClear’s 10th Anniversary, as it continues to establish itself as Asia’s preferred Over-The-Counter (OTC) clearing house. I would also like to thank participants at this Forum for your continuing support for Singapore Iron Ore Week, and wish you a fruitful and productive conference.