Holidays highlight Asian influence on OTC iron ore market

Trading volumes in the over-the-counter market for iron ore swaps slumped this week as national holidays in China kept the physical spot market quiet.

Three trades were completed at the beginning of the week. But, since then, market participants reported no new forward business concluded.

This including a contract for March settlement at $175 per tonne cfr Qingdao on a 62% Fe content basis on Monday and a Q2 ’11 settlement contract at $162.5 on the same day.

Tuesday saw one lone trade: a Q2 ‘11 prompt at $164 per tonne.

This just goes to show how reliant the OTC market is on Asian market participants.

This wasn’t so obvious back in October 2010, when the Chinese were celebrating Golden Week.

Europeans took advantage of the Asian absence and drove down levels; securing trades at these reduced prices in anticipation of market participants coming back after the week long holiday and driving prices up.

This week though traders and brokers – the few that have even been looking at the market – are happy to sit on their positions until volatility creeps back in.
This just goes to show that the market may be more Asian-centric than it used to be.

This has been proved recently by the big banks involved in OTC trading setting up arms in Singapore and the increase of trades settled in Asia before brokers have even got to their desks in London.