It is reported that three of the biggest banks in commodities plan to launch trading in iron ore, a further signal of the rapid growth of the mineral's derivatives market amid disarray in the annual price negotiations.
The move by Morgan Stanley, Goldman Sachs and Barclays Capital, a part of UK-based bank Barclays, into cash-settled iron ore swaps came as mining executives recently acknowledged openly that the traditional annual talks to settle iron ore benchmark prices is breaking down.
As SteelOrbis recently reported, although the annual negotiations have been continuing, the miners have come to the point of admitting that the benchmark pricing system is breaking down with the emergence of iron ore over-the-counter (OTC) swap contracts, a growing spot market and the index-based pricing mechanisms launched by Singapore Stock Exchange (SGX) on April 27.