Speech by SMS Chee Hong Tat at Singapore Iron Ore Forum 2019

Mr Kwa Chong Seng, Chairman, Singapore Exchange (SGX),

Ms Zhong Manying, Minister-Counsellor, Embassy of China in Singapore,

Distinguished guests,

Ladies and gentlemen,

A very good morning, and welcome to the 7th Singapore Iron Ore Forum. Thank you for joining us at this flagship event for the iron ore and steel community.

Singapore is a gateway to opportunities in Asia 

2. Despite concerns with rising trade tensions, Asia remains on track to achieve overall GDP growth of 5.7% this year. The region continues to offer tremendous growth opportunities for businesses, including those in the ferrous industry, and a lot of this, as Mr Kwa shared, is also linked to infrastructure development which will require steel and other raw materials.

3. While steel production in China may remain flat this year, India’s demand for steel is set to grow amidst new investments.  The same is true for Southeast Asia, where demand is supported by the growing automotive sector and infrastructure projects. 

4. Singapore is well-positioned to help you, to help our companies and to help our partners, capture these opportunities. Our proximity and connectivity to Southeast Asia, China and India and to many other parts of the world, makes us a natural gateway to the fast-growing economies in this region. We also have an extensive network of industry participants in a single location, including 80% of the world’s leading commodity traders, more than 200 banks, and over 5,000 logistics providers, creating a conducive business environment for commodity trading players.  

How Singapore supports ferrous industry players 

5. There are three areas where steel producers, traders and other ferrous industry players in Singapore can enhance their overall competitive advantage. First, improving risk management; second, innovating to stay ahead; and third, tapping on our strong talent pool to spur further growth. First, let me talk about risk management.

Ample risk management solutions 

6. Singapore offers ample risk management solutions for ferrous industry players to cope with volatility in the market. The Singapore Exchange (SGX) offers a suite of derivatives that caters to industry requirements. For instance, almost all derivatives of seaborne iron ore and coking coal worldwide are cleared on SGX, with iron ore volumes reaching the billion-ton mark annually since 2015. Most of the Forward Freight Agreements (FFAs) are also cleared on SGX. This is quite amazing if you think about it, because Singapore does not produce any iron ore.

7. SGX launched the 65% iron ore contract in December 2018 to meet growing demand for high-grade iron ore as countries across the region, especially China, strive for environmentally-friendly growth. I am pleased to learn that over 30 market participants have been trading this new futures contract since its launch. It is a very encouraging start and I’m sure there is potential for further growth. 

Innovative solutions to meet industry needs 

8. Let me now move on to the second area- which is how do we innovate to stay ahead. Singapore provides a conducive environment for our industry players to innovate. One key area is in trade settlement, where there is potential to make commodity trading more efficient, more transparent, and more secure. 

9. For example, a consortium of eight banks has been working with solution providers R3 and Bolero to build a blockchain-based platform, Voltron, that automates Letters of credit (LC) and trade finance documentation. Their innovation efforts have borne fruit: the first fully-digitised iron ore transaction over blockchain was completed between Rio Tinto and Cargill in Singapore in early November last year. The LC issuance for this transaction took less than 2 hours, compared to 1-2 days for traditional LCs. So it is not just an incremental improvement. The innovation allows industry players to make a quantum leap, to make a significant step.

10. I am delighted to learn from Enterprise Singapore that ferrous industry players are now working towards an industry-wide platform to make transactions even more efficient. We welcome such collaborative efforts, because we believe this would help develop more innovative trade solutions and create more win-win opportunities both for the traders and also for the solution providers and ultimately, for Singapore as a marketplace. 

Well-trained and diverse talent pool 

11. Lastly, a well-trained and diverse talent pool is critical to maintaining our competitiveness. To build a pipeline of Singaporean talent, Enterprise Singapore and our Institutes of Higher Learning (IHLs) have established training programmes for the trading industry. They have groomed over 100 students each year with the support of 55 industry partners, many of whom are present today. Thank you very much for your continued support. This is an area where we want to continue to work with you because we need a pipeline of local talent to complement our policy to remain open to international talent, because this is not an industry that you should look inwards and you should operate in silos, you actually need to plugged in and well connected with global trading networks and keep up with the innovations. For that, you really need to have an open policy to attract and retain talent, from all around the world, but also including from Singapore.

12. One of the latest programmes is the new Maritime Business Operations Track (MBOT) run by the International Trading Institute at Singapore Management University (SMU) and this started since January this year. The MBOT is a multi-disciplinary programme, taught by both SMU faculty and industry professionals. It equips graduates with relevant know-how to support the supply chain operations of trading companies. 

13. The inaugural Iron Ore Inter-Varsity Debate, held at the beginning of the Iron Ore Week, was also an opportunity for students to better understand the ferrous industry. Teams from the National University of Singapore (NUS) and Nanyang Technological University (NTU) engaged in a spirited debate about the impact of artificial intelligence on the industry, and impressed seasoned veterans with their knowledge and passion. 

Conclusion

14. Let me conclude by wishing everyone a fruitful day ahead and may your business and your trade continue to flourish and prosper. Thank you very much.