LONDON (Reuters) - The Singapore Exchange (SGX) is planning to launch four products for pricing thermal and coking coal as it boosts efforts to tap into growing demand for hedging tools in Asia amid a steep drop in coal prices this year.
A flood of cheap coal imports coupled with slowing growth in China, the world's top coal user, has sent benchmark thermal coal prices near their lowest in about four-and-a-half years at US$73 a tonne currently.
SGX said its two thermal coal contracts - SGX API 4 FOB Richards Bay Coal Futures and Swaps and SGX API 5 FOB NewCastle Coal Futures and Swaps - will be launched in July subject to regulatory approval.
It will also launch two coking coal contracts that month - SGX TSI Australia Premium Coking Coal Futures and Swaps and SGX TSI China Premium Coking Coal Futures and Swaps - allowing clients to hedge what amounts to a third of steelmaking costs.
"The new contracts are designed to cater to the needs of producers as well as consumers in the Asian bulk commodities market," the exchange said in a statement on Wednesday.
SGX already has two existing Asia-centered thermal coal futures and swaps, as well as a hot rolled coil steel future and swap designed to tap into rising consumption of the alloy in Southeast Asia.
The exchange clears the bulk of iron ore derivatives traded globally with the volume of swaps, futures and options more than doubling to 590,648 contracts last year, according to the exchange.
Still its iron ore swap volumes have fallen since China launched a competing product late last year.
In an effort to resist rivals and boost its Asian commodity derivatives footprint, SGX will also launch in June options on its Iron Ore CFR China Futures, as well as options on its four FFA freight futures.
Its new thermal coal futures will have a lot size of 100 tonnes while the swaps will have a lot size of 1,000 tonnes. For coking coal, the lot sizes will be 100 tonnes for futures and 500 tonnes for swaps. All the contracts will be cash-settled.