Distinguished Guests,

 

Ladies and Gentlemen,

Introduction

1.                   Good morning. It gives me great pleasure to welcome you to the 5th Singapore Iron Ore Forum.

2.                   Recognising the synergies between the commodities trading and shipping sectors, the Singapore Iron Ore Week is organised in conjunction with the Singapore Maritime Week for the first time this year. More than 1,000 market leaders and participants from across 20 countries have gathered here to network and share relevant insights. I hope you are enjoying the event thus far, and trust that you have had productive and stimulating discussions.

Outlook for the Ferrous Sector

3.                   The theme of today’s forum – “Embracing Today’s Market Dynamics: Redefining Tomorrow’s Steel Value Chain” – is timely given the evolving complexities in global trade, as we operate amidst increasing geopolitical uncertainties and rapidly changing market conditions. Despite the price rally towards the end of 2016, prices of iron ore and coking coal have fallen in recent months. Global steel demand is expected to remain subdued in the near term, with only a marginal 0.5% growth in 2017. Furthermore, steel anti-dumping measures in large global end-markets are contributing to an atmosphere of growing protectionism and augmenting uncertainties for the sector.

4.                   Nonetheless, the demand for ferrous commodities is expected to remain healthy in the medium to long term.  This is driven primarily by strong growth in Asia, boosted by the continued expansion of the economies of China and India. Within Southeast Asia, there is also strong demand for the development of road, rail and utilities infrastructure. These projects are expected to generate increased demand for iron and steel in the years ahead.

Singapore’s Trade Ecosystem

5.                   To tap into growth opportunities in Asia, companies need access to a strong supporting ecosystem within the Asian time zone. As one of the world’s top ferrous trading hubs, Singapore is well placed to play that role.

6.                   First, we provide an effective and neutral marketplace for global traders to structure their deals. Today, Singapore is home to over 140 companies across the metals and minerals value chain. Major iron ore companies which together supply more than 70% of global seaborne iron ore, have anchored in Singapore their global ferrous marketing and sales, risk and supply management, and chartering teams.

7.                   We also see increasing numbers of steel mills represented in Singapore, who are seeking to procure iron ore, hedge their risks and to conduct third party trading in Singapore.  Many of these companies have used Singapore as a base to market their finished steel products to Southeast Asia and beyond.  For example, Baosteel Singapore’s office has increased the quantity of steel it exported from its parent company, from around 20% in 2013 to 50% in 2016. This vibrant community of producers, end-users and independent traders allows information to flow quickly between counterparties, enabling relationships to be built and business opportunities to be found.

8.                   Second, the trading community in Singapore is supported by a strong maritime cluster. Situated along major shipping routes between the East and the West, Singapore is connected to 600 ports in over 120 countries.  Coupled with more than 140 international shipping groups based in Singapore, our traders can access a wide range of shipping service providers to fulfil their chartering needs.  Singapore’s strategic location has also led to the development of an array of shipping-related services including chartering, bunkering, crew change, ship broking and marine insurance – all of which support the operational efficiency and efficacy of the trading community in Singapore. 

9.                   This is why many major international trading companies have deepened their operations in Singapore by co-locating their shipping arms here. For example, Singapore has become a key shipping and commercial centre and bunkering port for Vale and its fleet. This has helped Vale to overcome the challenges of transporting large quantities of iron ore across the long distances between South America and its key markets in Asia.

10.               Third, as a global financial hub, commodity traders in Singapore have access to a wide range of financial and risk management solutions. Our liquid and diverse commodity derivatives ecosystem enables traders to manage their risks for three essential components of the ferrous supply chain, namely iron ore, coking coal and freight. For instance, traders can hedge their risks via the Singapore Exchange’s (SGX) iron ore contracts, which have the ability to drive the market as institutional investors account for a larger proportion of trades. This is why SGX continues to be the clearing centre for more than 90% of globally traded sea borne iron ore derivatives.

11.               Beyond iron ore, we have also seen growing interest in related coking coal derivatives as the industry shifts towards market-based spot pricing and index-linked pricing for coking coal. To illustrate, a total of 1.7 million tonnes was cleared by SGX in March alone, which was more than the entire volume cleared in 2016. Lastly, Forward Freight Agreements (FFAs), also offered by SGX, allow ship owners, charterers, and traders to hedge against the volatility of freight rates.

Deepening our Support for the Trading Community

12.               Notwithstanding the strong ecosystem that already exists in Singapore, we will continue to work with industry players to help traders better manage the heightened volatility in the industry. These efforts include developing deeper and more liquid commodity markets, with products and services tailored for Asian needs.

13.               I am pleased to note that SGX recently acquired the Baltic Exchange, which is an independent pricing benchmarks provider for global maritime routes. SGX intends to develop new benchmarks of Asian shipping routes, which will enhance traders’ ability to manage the volatility of freight rates for regional shipping routes.

14.               In addition, there are also plans to create an Asia Advisory Committee at the Baltic (BAAC) to strengthen representation of Asia’s shipping community. Altogether, the acquisition entrenches Singapore’s position as a maritime centre and adds to the vibrancy of Singapore as a commodities derivatives hub for the region.

Conclusion

15.               I want to conclude by emphasizing that the authorities, governing agencies and the SGX in Singapore remain strongly committed to developing the ecosystem that supports the entire value chain for commodities trading. We will ensure that Singapore continues to remain an attractive place for members of the iron ore industry to grow their business. I hope you will be able to find more opportunities for collaboration as we chart the way forward together. I wish all of you a fruitful day ahead.

16.               Thank you.

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