Three of the biggest banks in commodities plan to launch trading in iron ore, a further signal of the rapid growth of the mineral’s derivatives market amid disarray in the annual price negotiations. The move by Morgan Stanley, Goldman Sachs and Barclays Capital into cash-settled iron ore swaps comes as mining executives acknowledge openly that the traditional system of annual talks – known as the benchmark – to settle prices for the input to steel is breaking down.

The secretive negotiations are between Vale of Brazil, Rio Tinto and BHP Billiton and the steelmakers, led by Baosteel and the China Iron and Steel Association.