SGX iron ore lump premium futures traded volume rises in August amid mixed outlook

Total traded volume for SGX iron ore lump premium futures rose 19% month over month to 3.50 million metric tons in August, while average daily open interest fell 7.5% to 2.71 million mt from 2.93 million mt in July, exchange data showed.

The decline in open interest was largely attributed to reduced fund positions, while participation in the physical market remained subdued, an international trader said.

"For lump futures, the market is primarily used for hedging, so a decline in open interest likely reflects weaker physical trading activity seen during August," a Singapore-based trader said.

The combination of higher trading volumes and lower open interest suggested positions were being opened and closed more actively rather than held, according to a North China-based trader.

"The rise in volume and fall in open interest suggest both bullish and bearish participants reduced exposure. It points to lower speculative participation but offers little indication of future price direction," the trader said. "Market views on lump premiums were increasingly divergent, which supported trading activity, but participants appeared less willing to maintain positions after taking profits."

The dollar-denominated front-September SGX lump premium futures contract settled at 25.50 cents/dry metric ton unit at the end of August, up 26.6% from 20.15 cents/dmtu at the end of July.

IODEX derivatives open interest rises despite lower volumes

Meanwhile, total SGX IODEX derivatives trading volume, including futures and options, fell 6.8% month over month to 468 million mt in August, while average daily open interest increased 3% to around 302 million mt.

IODEX futures volumes alone declined 7.4% month over month to about 413 million mt, while average daily open interest rose 3.6% to just under 135 million mt.

The front-September SGX IODEX futures contract settled at $99.60/dmt at the end of August, up 3.9% from $95.88/dmt at the end of July.

Market participants said the increase in open interest suggested positions were being held for longer periods despite lower trading activity.

Recent volatility in Chinese markets encouraged speculative positioning, with funds and trading houses contributing to higher open interest, while physical hedging remained limited," an international paper trader said.

"Open interest fell sharply in June and has gradually recovered since then," a Singapore-based trader said. "Iron ore prices around the $100/dmt level tend to encourage more neutral positioning, which generally limits open interest growth.

A source at a China-based steel mill said higher open interest alone did not necessarily indicate a bullish or bearish market view.

"The increase in open interest suggests more positions are being held for longer periods, while short-term trading activity has eased," the source said. "However, open interest alone does not indicate directional conviction and should be viewed alongside price movements."