Ladies and Gentlemen,
1. Good morning. It is my pleasure to join you this morning at the virtual opening of the inaugural Singapore International Ferrous Week. Let me also extend a warm welcome to our foreign participants from over 70 countries. Your presence reaffirms the importance and relevance of this forum for the ferrous trading community.
Recovery from external shocks amid the COVID-19 crisis
2. The impact of the COVID-19 pandemic continues to be keenly felt today. Disruptions brought on by the pandemic have weakened global demand for steel and other raw materials, and fundamentally changed how business is conducted.
3. Businesses, including commodities trading companies, have had to quickly adapt. I know it has not been easy. The post-pandemic recovery is expected to be protracted and highly uneven across various geographies and sectors. Structural shifts accelerated by the pandemic also present a myriad of challenges for the commodities sector.
4. I know that this issue is at the top of your minds. Let me offer three suggestions on how the ferrous community can pivot and thrive in the new business environment.
Reinforcing Singapore’s position as a resilient offshore trading hub for the ferrous and steel sector
5. First, improving the sector’s ability to manage risks. There are at least two major risks which the pandemic has highlighted: market volatility risks, and supply chain risks.
6. Managing market volatility risks is existential to the sector. The wide swings in commodity prices in the last year have highlighted the need for more attention and tools to manage this risk. In Singapore, the Singapore Exchange (SGX) offers a comprehensive suite of price risk management tools across the steel value chain – from iron ore to coking coal, freight and steel rebar. This includes a new China rebar derivatives contract that will allow domestic and international participants to access China’s domestic steel market. Upon its launch in May 2021, SGX became the first international exchange to offer a steel derivatives contract based on domestic China prices.
7. The pandemic has also shown the importance of strengthening the resilience of our supply chains. I am happy to hear that despite global supply chain shocks triggered by the pandemic, Singapore’s commodities trading sector has remained relatively resilient. Offshore trade of iron and steel products grew by 9% from 1 billion in 2019 to 1.1 billion metric tonnes in 2020.
8. We aim to distinguish ourselves from our competitors based on the intangible factors – for example, our strong rule of law, favourable business environment, and liquid financial sector. Our highly skilled workforce also provides a pipeline of talent to support the front, middle and backend operations of commodities trading companies looking to locate here. Owing to this confluence of factors, Singapore’s ranking for the Commodity Trade Index improved to fifth place in 2020.
9. Nonetheless, we must work hard to preserve our status. One way to do so is to improve the transparency of Singapore’s trade financing. The Government has convened nine industry-led Alliances for Action (AfA), including one on Supply Chain Digitalisation.
10. This AfA will prototype the integration of a Common Data Infrastructure (CDI) with various source systems, such as those of shipping companies and financial institutions. It will also be integrated with the world’s first blockchain-based Trade Finance Registry (TFR), which will serve as a secure central database of trade finance transactions financed by banks in Singapore. We aim for the TFR to minimise the risk of fraud and duplicate financing, which are perennial bugbears of the industry. This will improve transparency of financing arrangements and give our banking sector more confidence to sustain commodity-based financing.
Accelerated digital transformation
11. The second thing the industry can do, is to embrace the opportunities afforded by digitalisation.
12. In 2020, the Government expanded the Electronics Transactions Act to enable the creation and use of electronic transferable records. Used extensively in shipping, logistics and finance, the electronic transfer of cross-border trade documents will pave the way for the seamless exchange of documents globally and eliminate the need for large volumes of paperwork.
13. Businesses are also riding the wave of digital revolution to maintain their competitive edge. Digital solutions allow companies to not only respond nimbly to severe disruptions, but also expand their repertoire of product offerings and transcend physical borders to access new markets. I am happy to see that many companies have not just adopted but even developed their own digital solutions, customized for their own needs.
14. For example, the Commercial Services and Digital team of Rio Tinto in Singapore launched iron ore spot trading on the WeChat mobile app last year. Customers can conveniently purchase small parcel sizes of iron ore direct from ports in China, with each transaction documented on their mobile phones. Who would have thought that you can buy iron ore on WeChat too! But such are the possibilities that digitalisation can unleash.
Capturing greater competitive advantages through innovation
15. Third, companies must continue to innovate to transform their operations and build new competitive advantages.
16. Singapore has a vibrant ecosystem that supports companies in their innovation journey. For example, we have a strong talent pool and network of Singapore-based incubators, accelerators and Institutes of Higher Learning (IHLs) to support your companies on innovation. There is also a variety of innovation challenges for companies to collaborate on industry-wide issues.
17. I encourage all our companies to launch or participate in these challenges to co-create solutions for your business needs. For example, start-ups can participate in the annual SLINGSHOT pitching competition organised by Enterprise Singapore (ESG), to develop innovative solutions that tackle corporate problem statements. You may think that a particular problem you are facing is unique, but this problem may well be faced by other companies too, and if we can combine our energies and resources to tackle it, we may have a better chance at cracking it.
18. I am glad to see that many companies have already started on this journey. For example, the Maritime and Port Authority of Singapore (MPA) recently signed a Memorandum of Cooperation with six corporations, including BHP, to establish a maritime decarbonisation centre here. The Centre will collaborate with our research institutes and IHLs to fund research and development projects to advance maritime decarbonisation efforts. I wish this project every success, and hope it will serve as a model for other projects to tackle industry problem statements.
19. Let me now conclude. We have come far in facing up to the challenges that COVID-19 has presented us. While the ferrous sector remained resilient to external shocks, we must work hard to reinforce our strengths as a trading hub and collaborate with one another on our common challenges. The Government stands ready to support you in transforming your businesses and preparing you for a more resilient future.
20. I wish you a fruitful conference, and hope it will lead to not just meaningful conversations, but also new partnerships that can take our ferrous sector to new heights. Thank you.