Following its pioneering work in iron ore futures, FIS was once again at the forefront of new product development, brokering the first cleared coking coal swaps and encouraging the world’s biggest producers into trading.
FIS believes coking coal has the potential to follow in the footsteps of iron ore and thermal coal, with derivatives growing into a mature asset class that can ultimately outstrip the physical market. The Dalian onshore China market already trades 4.4bn tonnes annually while offshore market volumes in 2017 comfortably overtook 2016 totals.
One of the main ingredients in the production of steel, requiring 0.7 tonne of coking coal and 1.5 tonnes of iron ore to produce one tonne of steel, seaborne trade in coking coal was 295m tonnes in 2017. Increases in demand for steelmaking raw materials saw front-month volatility in coking coal reach 87% in 2017, with prices ranging between $141 and $265/tonne.
With buyers in Japan and Korea now moving away from contract pricing and towards increased spot purchases, FIS can offer hedging tools including the Virtual Steel Mill concept where all commodity inputs – as well as outputs – can be traded as futures.