The iron ore swaps market emerged in response to the pre-2008 physical market where spot and short term prices had decoupled from the annual agreements that officially set levels between buyers and suppliers.
The coking coal swaps market is at a point of change. Until now, liquidity has been constrained by a lack of market depth which has made buyers and sellers reluctant to enter the sector in large numbers.
"FIS believes coking coal has the potential to mirror the development of the iron ore swap market."
Since the change in iron ore’s physical price structure took hold, other commodities have swapped inflexible annual agreements for index or spot-based pricing. This fundamental change has affected the steel, coking coal and scrap industries.
FIS believes coking coal has the potential to mirror the development of the iron ore swap market – a highly liquid market – attracting players from financial and commodity communities.
Coking Coal Market Indices
There are now three indices against which coking coal swaps can be traded. These are: