Mr S Iswaran at the Iron Ore Summit, 27 June 2011

SPEECH BY MR S ISWARAN, MINISTER, PRIME MINISTER’S OFFICE AND SECOND MINISTER FOR HOME AFFAIRS AND TRADE & INDUSTRY AT THE IRON ORE SUMMIT ON MONDAY, 27 JUN, 0935 HRS AT SHANGRI-LA HOTEL, TANGLIN BALLROOM

Mr Siddharth Rungta, President, Federation of Indian Mineral Industries (FIMI)

Dr Sundaresan Asokan and Mr Basant Poddar, Vice-Presidents, FIMI

Mr H Noor Ahmed, Chairman, Standing Committee for Ferrous Minerals & Industries

Distinguished Guests,

Ladies and Gentlemen

Introduction

Good morning. I am pleased to be here today at the 8th Iron Ore Summit organised by the Federation of Indian Mineral Industries (FIMI).I am pleased to note that this is the second time FIMI has selected Singapore as a venue to host this summit.

Global overview of the iron and steel industry

The world of commodities is seeing major changes as trade flows shift to Asia, commodity prices increase and competition for natural resources heat up. The iron and steel industy is undergoing similar transitions. About 70 per cent of the world’s seaborne iron ore is controlled by the Big Three – BHP Billiton, Rio Tinto and Vale.

In early 2010, the industry moved from the prevailing traditional long-term contract system to a spot market based system. With this change, iron ore prices are likely to experience a greater level of volatility, which would affect players across the industry.

Steel production has been steadily rising since 2004. In fact, in 2010, it grew by 25 per cent globally, hitting a new record in total production. The high production levels are fuelled by growing demand for steel, especially by high growth economies of China and India which thus increase the demand for iron ore. Despite being the second largest producer of iron ore, China is also the top importer of the commodity. This reflects the fast rising demand for the commodity.

With pressures such as price volatility, limited supply, sustainability issues and challenging weather conditions in top producing countries like Australia and Brazil, the iron ore and steel industry has to find new and innovative ways of coping with these challenges. This Summit is the ideal platform for industry players to engage in insightful discussion on pressing issues faced by the industry.

Growing metals and minerals community in Singapore

In today’s competitive and challenging industry environment, companies are looking for the most efficient locations for their international operations. In this context, the commodities industry in Singapore has been rapidly expanding as companies, both regional and global, are increasingly using Singapore to overcome challenges and capitalise on opportunities present in the current industry landscape.

Singapore is strategically located near both top producers and consumers of commodities, including iron ore. As such, we have been able to capitalise on our location to develop a dynamic and robust trading industry here.I am encouraged to note that our efforts have been yielding very positive results. BHP Billiton and Rio Tinto, two of the world’s largest iron ore miners, have based their global iron ore marketing operations in Singapore.Vale also has seen a growing presence here.

Besides the top global companies that dominate the industry, many regional and family-owned metals and minerals companies are also setting up operations in Singapore to grow their businesses and internationalise.

For example, Indian companies such as Mineral Enterprises Ltd, Rudhra Energy, Bagadiya Brothers and Kineta International leverage Singapore’s cluster of iron ore and steel companies for international marketing of their iron ore. To date, we have around 4,500 Indian companies present in Singapore. Top Chinese companies, such as Sinosteel, Minmetals and Sha-gang also carry out their iron ore procurement and steel trading operations in Singapore. Since the mid-2000s, the number of Chinese companies in Singapore has doubled to about 3,500. From South East Asia alone, we have seen about 8,000 companies set up operations in Singapore, many of whom are using Singapore as a base for their internalisation efforts.

Increasingly, the functions carried out by the commodity players in Singapore are surpassing pure trading activities. The breadth of their activities now spans across headquarter functions to include, international sales & marketing as well as procurement; holding and managing mines and related operations in the South East Asian region; and shipping, supply chain management and finance & treasury functions.

Strong business infrastructure and vibrant supporting ecosystem

Companies, particularly those in the resource sector, that have chosen to set up their operations here, are attracted to Singapore’s position as a global business city that has a well established trading infrastructure backed by world-class financial, logistics & shipping industries, a pro business environment, political and economic stability, and a strong talent pool.

Singapore’s strong economic ties with ASEAN and China especially, serve as an added advantage for companies with operations in Singapore. Our network of 18 FTAs in force also add to the strong global connectivity we have. Singapore's network of Double Taxation Agreements and Investment Guarantee Agreements, which are especially important for mining businesses that typically operate in high risk environments, have also enabled resource companies to secure their investments and achieve tax optimisation.

Singapore’s strengths in ‘software’ are also critical factors that attract global trading companies here. The sophistication of our financial infrastructure is especially important for trading companies and headquarters with finance and treasury functions. This holistic ecosystem ensures that Singapore provides its business community an environment where ideas can be turned into a commercial reality relatively quickly and profitably.

Singapore has also evolved into a leader in risk management infrastructure in Asia. In April 2009, SGX AsiaClear launched the world's first clearing facility for over-the-counter (OTC) iron ore swaps in Singapore. Today, SGX AsiaClear accounts for a significant proportion of global iron ore swaps, having cleared more than 34 million tons of iron ore swaps since the service was launched in 2009.

As Singapore evolves to become a melting pot of global and regional talent, human capital has become one of the other strengths in ‘software’ for us. We have top business schools such as INSEAD, renowned research institutes and government initiatives to develop talent such as the Human Capital Leadership Institute and the International Trading Institute. Companies can tap into this pool of talent to recruit, develop and manage human capital.

It has also been our effort to develop Singapore into an intellectual property management hub backed by strong rule of law, especially in the area of arbitration. The Singapore International Arbitration Centre was ranked fourth in an inter-national arbitration survey last year. Companies can enter into contracts adopting Singapore Laws, and conduct arbitration in Singapore to resolve trade conflicts quickly.

Further to business needs, Singapore offers a high quality of life. The 2010 Mercer Quality of Living Survey ranked Singapore as having the best quality of life in Asia. According to another survey by ECA International, Singapore was also found to be the first choice for Asian expatriates.

Singapore economy: future outlook

Looking ahead, Singapore will continue to grow and develop its metals and minerals sector. The Singapore government will maintain a sound, stable, predictable regulatory environment for business. We will continue with a free-market orientation in our regulatory approach, regulating in accordance to best practices and complying with international standards of governance.

Conclusion

Once again, I would like to thank FIMI for inviting me to grace this summit. This Summit presents an excellent opportunity for the industry to exchange ideas and seek partnership opportunities. I trust that you will find this platform useful to network and share insights. Thank you.