Banks to lose market share by next year
The proportion of banks and funds participating in the iron ore swaps industry is set to shrink significantly in 2011 as a wider range of counterparties enter the market.
In 2011, financial entities such as banks and funds are estimated to hold a 30% share in the iron ore swaps market, down from 70% in 2009 and around 45% this year, according to Freight Investor Services.
However, this will still leave them as the largest participant by sector, followed closely by traders and end-users.
Speaking at a Singapore-based iron ore conference last week, FIS" Michael Gaylard presented forecast trading dynamic estimates for the iron ore swaps market in 2010 and 2011.
With a limited pool of iron ore producers, counterparties from this area of the business are expected to stay low, at 5% of market share.
In contrast, end-users such as steel mills and traders are expected to rapidly increase their share of the market from 10% this year to 25% in 2011. The number of counterparties from the shipping sector is also forecast to climb to 15% of the iron ore swaps market next year. Many began trading in 2010.
The FIS presentation also showed that although Asian and European counterparties were actively trading iron ore swaps in 2009, the market is expected to spread globally by 2012 and attract participants from India, reflecting its expanding presence in the iron ore export market.
South America and a small proportion of US-based counterparties are also estimated to be active by 2012.