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1. Guest of Honour Dr Tan See Leng, Minister for Manpower and Second Minister for Trade and Industry, our strategic partner Enterprise Singapore, event partners Fastmarkets, S&P Global Platts and TradeWinds, distinguished guests, ladies and gentlemen, good morning.
2. A very warm welcome to the Singapore International Ferrous Week 2022. Thank you for joining us at this flagship event for the steel value chain – an annual gathering for participants across the shipping, iron ore, coking coal and steel industries.
3. Last year when I was delivering the opening speech virtually for this event, I said I look forward to meeting all of you in person this year. And here we are today. Finally, after a long fight with COVID-19 in the past two years, we are seeing much more normalcy back into our lives today, and we are now able to see each other face-to-face.
INDUSTRY OUTLOOK
4. As the world begins to move on and borders gradually opening, there is a lot to look forward to. Global economic recovery is well underway, driven by full employment, strong consumer demand and a return to post-COVID normalcy.
5. While pandemic-related disruptions are expected to impact the economic recovery of China, the world’s top steel producer, Fitch has raised its 2023 growth forecast for the country slightly higher to 5.2%, on the assumption that the government will phase out its ‘dynamic zero-Covid’ policy gradually, over the course of next year.
6. With developed nations now embarking on infrastructure refresh initiatives, strong growth in green infrastructure projects such as wind power turbines, solar panels, green buildings and emergence of electric vehicles (EVs), demand for steel and its raw material iron ore, looks set to hold steady in the next couple of years.
7. Some believe we are at the start of a long commodities super cycle. Today, policymakers and market participants alike are grappling with what could be a sustained period of price inflation and volatility in raw materials.
8. On this note, I would like to discuss two key trends that we see will be happening in the coming years.
MORE RISK MANAGEMENT IS NEEDED
9. Firstly in this volatile environment, risk management remains vital. Three years ago, when I was addressing the audience at the 2019 Singapore Iron Ore Forum, I asked if iron ore prices at above US$100 a metric tonne was sustainable. At that time, iron ore prices were at a record due to a combination of geopolitical factors, macro outlook and supply shocks in part due to the mining tragedy in Brazil that year.
10. Since then, iron ore prices went on to hit new highs, exceeding US$200 a ton last May before collapsing in July and August. Prices are volatile, Prices across a range of commodities also experienced extreme volatility driven by black swan events – ongoing conflict in Ukraine, supply chain disruptions and fat tail risks have become more commonplace. Market observers have noted that such volatility is something we have to deal with and here to stay. Therefore, risk management needs to remain robust and responsive, and a liquid market to hedge risks is essential.
11. Against this backdrop of market volatility, we have seen strong growth in our commodity derivatives volumes, especially in the iron ore and freight contracts. The high liquidity of these contracts cuts across time zones, reflecting the nature of risk management today, which is 24/7 and across international markets.
12. But price hedging using derivative contracts is but one dimension of risk management. Risk management is also about building resilience and trust, giving market participants the assurance that we will continue to keep the lights on as you navigate through market turbulence.
13. We recognise that all participants within the commodities ecosystem play distinctive and important roles, and it is important that we stay close to the ground, maintain close engagement to ensure that our risk management and price discovery tools remain relevant, and that we continue to develop new products that serve our clients’ price risk management needs.
14. At SGX, we continue to innovate and launched our steel rebar derivative in May last year, completing the “Virtual Steel Mill” to offer price discovery and risk management tools for the entire steel value chain – from raw materials to freight and all the way to the end-product.
COMMODITIES INDUSTRY WILL CONTINUE TO DECARBONISE
15. Which brings me to the next big trend that we are seeing, sustainability. It is a very hot topic now, headlining many events and conferences, including this one. But it is an especially salient topic for the audience here, as the steel industry will play an very important infrastructure enabler role in the world’s green energy transition. Yet, it accounts for some 8% of global CO2 emissions.
16. The steel industry has been ramping up efforts to reduce its carbon footprint, through the use of technology, new manufacturing processes and replacement of raw materials and energy sources. In tandem with this, over the last few years, SGX has developed a suite of “greener” derivative products that the industry can utilise effectively, as they transit towards cleaner energy sources and raw materials. These include the 65% high-grade iron ore futures and options, low sulphur fuel oil and methanol futures.
17. The global decarbonisation drive has also fueled the growth of sustainable transportation, including electric vehicles EVs. We see our metals derivatives franchise playing an increasingly important role in the EV value chain and are now developing a suite of EV battery metals derivative contracts to be launched in the months ahead.
18. The growing demand for investment opportunities in the world’s largest EV market, China, has also led to the launch of the first China EV exchange-traded fund on SGX earlier this year. This week, we will also welcome the listing of a premium smart EV company, NIO, better known as the Chinese Tesla, the first EV company to list on SGX’s securities market.
19. Sustainable initiatives need capital, and this is where SGX’s fundraising platform can enable commodity companies, including steel companies, to fund their environmental and sustainability efforts through the listing of Green, Social and Sustainability bonds on our platform.
20. To help companies address these hard-to-abate emissions, SGX, together with DBS, Standard Chartered and Temasek, have also launched Climate Impact X, a global marketplace for high-quality carbon credits, sourced from verified projects around the world that deliver genuine, positive impact to the environment.
21. All these are examples of how SGX’s multi-asset platform can support producers, suppliers and consumers across the ferrous value chain in their sustainability journey.
IN CLOSING
22. Every part of the commodities ecosystem has a role to play in these key developments. This conference has thus lined up speakers across the ecosystem who will dwell deeper into these big trends – sustainability, risk management, and how the Metaverse will play out in the commodities world.
23. As the world recovers from the pandemic, I am sure there will be many active conversations on the way forward for the ferrous metals industry in the coming days.
24. I wish you all a fruitful week ahead. Thank you!
