ICAP launches iron ore derivatives broking service
London-based commodity trading service ICAP plc has launched a new broking service for global iron ore derivatives, offering market participants the ability to offset risk exposures in one of the world's leading base metal asset classes.
The new service builds on ICAP's existing presence in both base and precious metals.
Major iron ore producers and steel makers have long had to rely on annual fixed price contract negotiations, says ICAP.
During the last 18 months, however, significant price swings and volatility in base metals has highlighted the flaws governing the long term contract system and the inflexibility it offers prudent risk managers from both the buy and sell side, ICAP said.
Consequently, an increasing number of physical market participants are entering into swap agreements that provide both price certainty and flexibility in a capital efficient manner.
ICAP will use its electronic capabilities to provide iron ore derivative price distribution between Asia, Europe, and the Americas, providing global execution and research services to a broad spectrum of market participants.
Commenting on the launch, Paul Newman, Managing Director of ICAP Energy Ltd. said "By combining our voice broking expertise with ICAP's global electronic footprint we are well placed to provide derivative trading synergies between iron ore and our existing coal, freight, and base and precious metals services, " said Paul Newman, managing director of ICAP Energy Ltd.
"With a greater concentration of physical iron ore trade being exposed to spot market volatility, and a global focus fixated on seaborne trade in Asia, the region occupies a significant position in the future development of the iron ore derivatives market," said Don McClumpha, Deputy CEO, ICAP Asia-Pacific.
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