The SGX Commodities Day was held in the Westin Hotel in London in November, and brought together some of the world’s top commodities traders, brokers and analysts, including SGX’s many commodities experts.
The aim of the day was to analyse the state of the various commodities that can be traded on Singapore Exchange (SGX Group), from freight and iron ore to rubber and dairy, and, most recently, battery metals.
The SGX Commodities Day in London comprised panels and presentations on all of the exchange group’s main commodities derivatives offerings. Over 90 participants across commodities traders, brokers, analysts and funds attended the event. The day began with introductory remarks from Pol de Win, Senior Managing Director, Global Head of Sales and Origination, who gave an overview of SGX’s various commodities trading products.
Virtual Steel Mill
He traced SGX’s journey from its launch of the world’s first iron ore swap in 2009 to its current position as the market-leader for iron ore, coal and freight, a complex that is embodied in SGX’s Virtual Steel Mill.
De Win discussed the October 31 launch of the SGX Shanghai Rebar futures product, the only international steel rebar contract based on domestic Chinese prices, that effectively completes the Virtual Steel Mill.
De Win, who went on to discuss the exchange group’s initiatives in carbon offsetting and battery metals for electric vehicles, concluded by underlying SGX’s commitment to commodities as the “bedrock of industrialisation”.
Tan said: “What sets us apart at SGX commodities is our strength in seaborne price discovery as well as commodities contracts that underpin Asian industrialisation.”
SGX’s commodities business is anchored around the steel value chain and the transport and car value chain. The exchange also has a strong market share in rubber and petrochemicals, with a diverse mix of international market participants across physical and financial traders.
Tan said he sees great opportunities for the exchange group as these commodities move through the process of “financialisation” which will see them become commoditised trading products.
The first panel of the day brought together three iron ore experts – Christopher Menzies of Svelland Capital, Serrafino Capoferri of Macquarie Global Markets and Colin Hamilton of BMO Capital Markets.
The panel discussed the outlook for the Chinese economy and, specifically, the prospects for the Chinese property industry which has been in recent years the global driving force for many global commodities including steel.
The panel agreed that, while there are signs of a slowdown, the Chinese growth story is certainly not over, and firms should expect to see further opportunities linked to Chinese consumption of global commodities.
The panellists agreed they will be watching China for signs of renewed growth in the coming weeks and into the Chinese New Year.
To conclude the first session of the day, Mark Jackson, the chief executive of Baltic Exchange, the London-based exchange that provides real-time maritime shipping information to traders for settling physical and derivative shipping contracts, gave an overview of that business.
With a history stretching back over 275 years, the Baltic Exchange, an SGX Group subsidiary, is the benchmark for freight, offering a range of services including various indices which are licensed to exchanges.
Freight in Focus
Jackson also touched on the state of the freight market as it has responded to the logistical challenges presented by the Russian invasion of Ukraine.
After a short refreshment break, the conference turned its attention to new opportunities in the shape of battery metals and carbon offsets.
Sam Adnam, a Senior Powertrain Analyst at LMC Automotive, gave an update on the global demand for battery metals and considered how the supply of battery metals will affect the delivery of battery-electric vehicles (BEVs).
Adnam warned of a huge disparity between the amount of money being invested in the downstream end of the supply-chain in contrast with the funds going into raw material extraction and processing.
The second panel of the SGX Commodities Day London focused on the rapidly evolving challenge of decarbonisation in the commodities industry.
The panel drew upon the expertise of Chris Kennedy of Fortinbras, David Stead of Vertree and Julien Hall of Climate Impact X, which is part owned by SGX.
The panellists discussed the relative progress of the mandatory carbon markets or “compliance” markets and the newer voluntary carbon offsets markets. The panel agreed these two markets would likely converge over time and, ultimately, there will be a single carbon price that is drawn from the two markets.
The SGX Commodities Day London concluded with Fiona Boal, the Global Head of Commodities and Real Asset at S&P Dow Jones Indices, detailing the index providers’ various tradeable benchmarks, offering specific sector exposure, individual commodity exposure and, increasingly, thematic products.
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