The Japanese steel industry, the world’s largest after China, has started to lock in iron-ore prices through the use of derivatives in the clearest sign of the development of a financial market around the commodity used in steelmaking.
The use of iron-ore swaps to hedge volatile prices comes after miners and steelmakers ditched the 40-year-old system of annual contracts this year, replacing it with quarterly contracts linked to the volatile spot market.
Mitsui, the Tokyo trading house or sogo shosha, said it had signed the country’s first ore swap with Credit Suisse. The bank confirmed the deal.
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