Xinhua net Singapore on May 8, special telegram (reporter Chen Jipeng Singapore Hu Juan hin) is at the first iron ore BBS has attracted many Chinese steelmakers are represented. Industry insiders said on Monday the trend of the iron ore financialization irreversible, iron and steel enterprises should as soon as possible to prepare for it.

Participants said that the trend of the iron ore financialization and its pricing mechanism changes in recent years. In 2010, based on the annual agreement in the price of the international iron ore pricing system to collapse, the international mining giant is pushing to spot ore prices as a benchmark pricing mechanism, and its pricing mechanism is more and more short, now, about half of the market price is 1 months spot ore prices as a benchmark. It also makes the iron ore price fluctuation in the more and more frequent, which has given rise to the demand for a hedge.

The CCCMC said President ucg, frequent fluctuation of price of iron ore to steel and iron ore traders bring challenges, need use financial instruments to hedge the risk of the spot market.

Ucg said, the Singapore exchange to the rapid growth of the launch of the iron ore swaps has also introduced a standard iron ore futures contracts, which can provide a hedging tool for the market, also will provide a centralized, as market participants open, almost completely resulting price competition environment, which has important reference meaning. China is also to develop iron ore futures research work, hoped that both sides will strengthen cooperation.

Is the director of the Singapore exchange derivatives XianXianMing said in an interview, financial derivatives is a contact spot trading and futures of the link, is advantageous to the enterprise risk hedge. But he believes that the use of financial instruments to hedge risk can be a double-edged sword, the main risk is that wrong or choose the wrong hedging instruments, or is in the process of hedge failing to properly estimate the impact on cash flow. Companies want to use financial instruments in the financialization of the iron ore market to hedge risk, needs the accounting, technical operations and prepare on how to track dynamic changes.