[ferro-alloys.com]Singapore Exchange (SGX), a hub for iron ore derivatives trading, is eyeing the possibility of launching a steel scrap derivatives contract in recognition of the growing importance of the scrap and recycling market, Will Chin, the exchange's head of commodities, said Wednesday.

"Scrap is on our radar," Chin told S&P Global Platts in an interview in London. "Many believe scrap is the future: it's going to be big, a 25-year story."

Over the last five years, Turkey, the world's biggest ferrous scrap importer, has sought a "vocational price" for ferrous scrap in a key pocket of liquidity, Chin said.

As scrap is a basic raw material for steel rebar production, this is expected to be linked to the rebar futures contract on the Shanghai Futures Exchange (SHFE), "China's most active commodity contract", which has undergone "phenomenal" growth to become an industry benchmark, according to the SGX executive.

Now, however, scrap volumes are also set to increase in a significant way in China, when that nation's first wave of mass consumer goods start to come to the end of their useful life and are recycled, Chin said.

SGX has seen liquidity in various iron ore derivatives contracts. Platts estimates some 95% of all iron ore futures traded on the exchange in 2017. It launched coking coal derivatives in 2017. SGX sees one of its natural success areas as products involving seaborne transportation into and out of China.

Ferrous scrap futures have taken off over the last two years on the London Metal Exchange after a product launch in 2015 was followed by a boost by market makers.

Introducing a scrap contract could be part of a move by SGX to broaden its steel offering. The exchange already offers a CFR ASEAN hot-rolled coil steel futures product which "is not working," possibly because of the huge and highly fragmented nature of the steel market, Chin said.

"We want to get involved in steel in a bigger way: it's figuring out the right way and the right contract ... and if there are index providers," he said.

Still, conversations are "ongoing" on the subject, he said, adding: "We have coking coal and iron ore working, let's get steel working too."

(S&P Global Platts)

• [Editor:王可]