It is reported that CME Group Inc the world largest futures market recently announced that they will launch iron ore swap futures with 62% ferrous content delivered into China and freight and insurance will be included.
According to CME Group announcement the commodity code for the new contract will be TIO. It will be listed for 24 consecutive months, with August 2010 as the first listed contract month. The contract will be 500 dry metric tons in size with a minimum price fluctuation of USD 0.01 per tick
The contract will be cash settled against The Steel Index daily spot price for iron ore fines with 62% ferrous content delivered into China.
Mr Joe Raia CME Group managing director of energy and metals products and services said "This contract complements 12 dry freight futures that we launched earlier this month and furthers our goal of building a complete marketplace for seaborne dry freight products, providing risk management tools across the full ferrous production cycle."
In fact, since the iron ore long contract pricing mechanism which was maintained for over 40 years, collapsed this year, risks of iron ore price fluctuation has increased dramatically.