Zacks Equity Research
·4 min read
CME Group Inc. CME is set to unveil two China portside iron ore futures contracts. They will be launched, following regulatory approval, on Jan 10, 2022.
The two contracts, Iron Ore China Portside Fines CNH, fot Qingdao (Argus) futures contract and Iron Ore China Portside Fines USD Seaborne Equivalent (Argus) futures contract, will be financially settled based on assessments for portside prices published by Argus Media.
The Iron Ore China Portside Fines CNH, fot Qingdao (Argus) futures contract is a new futures product offered by COMEX, which is quoted in Chinese Renminbi (CNH) per wet metric ton. The Iron Ore China Portside Fines USD Seaborne Equivalent (Argus) futures contract is a new futures product offered by COMEX, which is quoted in USD per dry metric ton.
CME Group’s suite of Ferrous products includes Iron Ore and Steel futures and options. These futures offer risk management tools for the global commodities across the supply chain. CME Group’s suite of Ferrous metals is traded over-the-counter and cleared through CME ClearPort and CME Globex that offer $8 billion of financial safeguards.
These new futures are expected to minimize supply chain risk, trade financially settled contracts against industry-leading price indices as well as hedge exposure to global economic growth.
CME Group continues to focus on driving growth and new customer acquisition by expanding, innovating and scaling its core offerings, and increasing participation from non-U.S. customers. This is achieved by expansion of its global sales team, cross-selling of products, expansion of the existing benchmark products, product and service launches and deepening of open interest in core futures and options offerings.
The new iron ore futures contracts will add to CME Group's existing ferrous suite of products. In a bid to meet the growing demand for these new tools, CME Group plans to launch these futures, which are expected to manage the price risk efficiently.
Over the past decade, CME Group has been a pioneer in ferrous metals price risk management. It has been offering a versatile set of solutions across the ferrous supply chain. It has also invested in expanding into the iron ore space, with products covering two similar parts of the iron ore supply chain.
The iron ore market is one of the largest physical commodity markets in the world with an annual production of more than 2.5 billion MT. CME Group products allow customers to access hedging and risk management solutions for both seaborne and portside iron ore exposure. The CME Group Iron Ore suite allows price risk to be managed independently from physical supply. Futures and options are a cost-efficient hedging tool to mitigate risk and protect profit margins.
CME Group exchange consists of designated contract markets for the trading of futures and options contracts. It enables clients to trade futures, options, cash and over-the-counter (OTC) markets and optimize portfolios. It focuses on maximizing futures and options growth globally, diversifying business and revenues, and delivering unparalleled customer efficiencies and operational excellence.
Shares of this largest futures exchange in the world in terms of trading volume as well as notional value traded have increased 26.3% in the past year compared with the industry’s increase of 31.4%. Nonetheless, the company’s policy to ramp up its growth profile and capital position should help shares regain momentum.
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The stock currently carries a Zacks Rank #3 (Hold).
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