By Luke Jeffs

Pol de Win, Senior Managing Director at SGX Group, opened the SGX Commodities Day in London with a Welcome Address that outlined the strong progress the Asian exchange has made in commodities over the past decade.

De Win, who joined SGX as head of global sales and origination in July 2021 after two decades at Goldman Sachs, began by asserting SGX’s track record of innovation in commodities, starting with iron ore.

De Win told the delegation at the Westin Hotel in the City of London: “SGX launched the world’s first cleared iron ore swap in 2009 and within five years we saw one billion tonnes annually in cleared volumes. This year, we are on track for three billion tonnes.”

Iron ore record

Given iron ore is a key ingredient in the production of steel, the SGX iron ore products have become in recent years proxies for China, which partly explains their rapid growth trajectory, but De Win said the SGX iron ore products are also attracting clients outside Asia.

“The market has grown both in diversity of participants and geographically, with particularly strong growth coming from participants in the Western hemisphere. This is why we are highly committed to our growing footprint in Europe and the Americas,” he said.

The SGX Commodities Day held in early November was timely, coming just days after the exchange launched on October 31 its Shanghai Rebar futures product, the only international steel rebar contract based on domestic Chinese prices.

Rebar, which is reinforced steel, is becoming increasing important in construction, particularly of critical infrastructure such as highways, bridges and tunnels.

SGX Virtual Steel Mill

While opening up a nice arbitrage opportunity between SGX and mainland China, the launch also represented an important milestone for SGX’s Virtual Steel Mill project, which began in 2009 with the iron ore swap.

De Win said: “The ‘Virtual Steel Mill’ was completed this week, with the launch of the Mysteel Shanghai Rebar futures contract which broadens our offering around the iron ore and steel product groups. The launch allows market participants to trade across the steel value chain with high capital efficiency. We’ve already seen good trading in the contract since its first day.”

As well as its iron ore and steel products, SGX is also working hard to meet the changing demands of investors in Asia and further afield for commodities that support the transition to a more sustainable economy.

De Win told the delegation: “ESG remains at the forefront of our development plans. Just over a month ago, we launched four new battery metal contracts in lithium and cobalt, providing critical risk management tools in this fast-growing market.”

Four Battery Metals

SGX launched on September 26 a suite of commodity contracts based on four electric vehicle (EV) battery raw materials – cobalt metal, cobalt hydroxide, lithium carbonate and lithium hydroxide.

And SGX is also playing its part in the global effort to cut carbon emissions in line with its July 2021 pledge to comply with 1.5 degree science-based emission reduction targets, the first Asian exchange to make such a commitment.

SGX, with Singapore’s sovereign wealth fund Temasek, DBS and Standard Chartered, founded in May 2021 Climate Impact X, a joint venture to develop a global marketplace for high-quality carbon credits. 

De Win said: “In the carbon space, SGX invested in a new carbon trading platform called Climate Impact X, which last week completed its first auction of 250,000 tonnes of Respira Delta Blue carbon credits.”

Reflecting on the commodities space more broadly, De Win added: “Commodities are the bedrock of industrialisation, and helping participants manage volatility in this asset class is a key strategic focus for SGX Group.

“Our Currencies and Commodities business has been a strong contributor of growth, and made up 22% of group revenues in our most recent fiscal year, as we continue to deliver on our multi-asset strategy.”

Before handing over to his colleague Tan Tee Yong, a director at SGX Group, who offered a more granular look at the SGX commodities portfolio, De Win concluded: “Today’s forum will cover a broad range of topics, ranging from iron ore to freight as well as carbon and the electric vehicle market in Europe as we enter into the EV metals space. I hope that everyone will have a fruitful and engaging SGX Commodities Day.”

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 presentations are being published in a series.

The first article covering the SGX Commodities Day in London is available here.