The rise of iron ore derivatives

A shift in the way iron ore cargoes are priced has helped give rise to a burgeoning market for iron ore derivatives. Interest in trading the product has come from a wide range of participants, including producers, consumers and investors – making it one of the few bright spots for bank commodity desks. Jay Maroo reports

Iron ore is beginning to give rise to a market for risk management products that befits one of the world’s most important commodities. The vast majority of iron ore is used to make steel – a product integral to the construction of buildings, railways, planes, ships and myriad other necessities of the modern economy. Moreover, in recent years, seaborne trade in the commodity has ballooned thanks to strong demand from Chinese steelmakers, which are its biggest global buyers.

Despite that backdrop