The Singapore Exchange (SGX) said on Wednesday it is only a matter of time before state-owned steel mills in China start using its iron ore swaps contracts to hedge risk.

SGX, whose iron ore swap volumes reached a record 5.3 million tonnes in the second quarter as traditional pricing arrangements in China collapsed, added that it expected its business to expand strongly.

“We have been very successful with private steel mills in China, now we’re trying to get involved with the state-owned steel mills,” David Battle, SGX chief representative for Europe and North American institutions, said at an iron ore industry forum.

“We are getting an increased number of people in the sector asking about the contracts and we feel it is only a matter of time before they find a way to participate in the market place.”

The rising popularity of iron ore swaps comes after the collapse of the decades-old annual iron ore benchmark pricing system earlier this year and the introduction of quarterly iron ore contracts.

The quarterly contracts are supposed to more closely mirror fast changing market conditions, while swaps and options contracts offer industry players a means of hedging price risk.

Steve Randall of The Steel Index said at the forum that iron ore had been the catalyst for the whole ferrous sector to move towards the use of financial products to hedge risk and discover fair prices.

“Iron ore pricing has changed forever, we’re not going to see a return to annual fixed prices. Steel pricing is following, we’ve seen index linked arrangements being adopted,” said Randall.

He added: “Iron ore’s move towards financial instruments has made people focus on opportunities (not only) for steel, but for scrap and coking coal.”

Earlier on Wednesday, the Dalian Commodity Exchange said it would launch the world’s first metallurgical coke futures on Dec 15, creating a new hedging tool for steel mills and traders.

Meanwhile, Norwegian clearing house NOS Clearing said it would launch clearing services for iron ore swaps and options contracts from Nov 1.