The New York Mercantile Exchange, the world’s largest energy trading market, is reaching overseas to give traders the ability to bet on the skyrocketing cost of shipping commodities such as coal, steel and iron ore.
Nymex, which has been riding a boom in oil and natural gas trading for several years, is expected to announce today that it has purchased a 15 percent stake in freight derivatives exchange Imarex for $52 million, according to sources familiar with the deal.
Imarex, based in Norway, provides shipping companies, merchant banks and other big financial players the ability to bet on movements in global freight prices.
More than 90 percent of the world’s traded goods by volume are carried by sea in large tankers. Over the last few years, global freight prices have soared along with demand for commodities such as iron ore, coal, grains and cement.
Imarex also provides trading on prices of farm-raised salmon and power plant emissions.
The move is seen as Nymex’s first step toward an outright acquisition of Imarex, which is now valued at more than $300 million. The exchange is buying the stake from Frontline Ltd., the world’s largest oil tanker company, sources said.
While still in its infancy, trading of shipping futures is already an $80 billion market that is attracting financial giants like Goldman Sachs and big hedge funds that have been active in the oil and natural gas markets.
Speculation on oil has driven prices up to nearly $100 a barrel recently as traders bet on global energy shortages.
Trading on Imarex is up over 150 percent since last year and the company’s stock, traded on the Oslo stock exchange, has nearly doubled.
The move also gives Nymex a foothold in Europe, where commodities trading is rapidly expanding. Earlier this year, the Nasdaq Stock Market took a stake in Nordic exchange operator OMX and the New York Stock Exchange recently completed its merger with pan-European stock exchange Euronext.
As demand for basic commodities increases along with the economies of China and India, big banks, clearing houses and hedge funds are expected to enter the freight futures market in order to hedge their exposure to fluctuating commodities prices.