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The “Steel Home 2020 Iron & Steel Industry Chain Development Summit” is held in Hangzhou under the support of Dalian Commodity Exchange (DCE) on November 2. Chen Wei, senior expert of DCE, says that DCE will continue to facilitate the development of the iron and steel raw materials futures market through continuous innovation and services, promote the better integration of the futures market into the iron and steel industry, and raise the level of serving the real economy and the supply-side structural reform.
DCE has carried out various tasks on playing market functions and deeply serving the iron and steel industry in recent years. The first is optimizing the contract rules and systems. DCE has implemented the iron ore warehouse receipt service provider system and improved the quality standards of iron ore and coking coal futures contracts. And it has rolled out the iron ore futures brand delivery system in September this year to further improve the representativeness of futures prices.
The second is improving market liquidity. In the first 9 months of this year, the unilateral average daily trading volume and unilateral average daily open interest of coking coal, metallurgical coke and iron ore futures of DCE is 1.62 million contracts and 1.23 million contracts respectively; the participant structure of the futures market has kept improving, with the position ratio of ferrous products corporate clients reaching about 40% and over 10,000 industrial corporate clients taking part in the trading of coking coal, metallurgical coke and iron ore futures. In the first 9 months, the accumulated delivery amount of ferrous futures of DCE was 1.156 million tonnes and its delivery has been smooth.
The third is enriching the derivatives instrument system to satisfy enterprises’ individualized risk management demand. DCE has set up the derivatives instrument system with a full range of products like coking coal, metallurgical coke and iron ore futures, iron ore basis trading and ferrous commodity swaps. The commodity swaps business was launched in December 2018. Up till now, 66 dealers and 8 designated depository banks have conducted 27 transactions, with the nominal trading principal of RMB 290 million and the participants involving trading companies, manufacturing and processing enterprises and investment institutions. The basis trading platform was officially launched on September 25, 2019. Up till now, 20 dealers and 1 designated depository bank have taken part in basis trading. Till the end of October, the basis trading platform presents the accumulated 450 quotations and 108 transactions, involving the spot goods of 361,200 tonnes and the nominal principal of RMB 450 million. In particular, accumulated 23 transactions of iron ore products have been conducted with the turnover of 335,000 tonnes and the nominal principal of RMB 243 million.
The fourth is keeping exploring the effective way of serving the real economy. DCE has piloted the “Corporate Risk Management Plan” for coking coal, metallurgical coke and iron ore enterprises, which involves the business modes like over-the-counter options, floor-traded options and the basis trading, providing industrial enterprises with diversified and individualized risk management service.
The fifth is strengthening the market cultivation to consolidate the basis for market development. DCE has always regarded serving industrial enterprises’ risk management as the key to improving market operation quality and efficiency. Since the beginning of this year, DCE has implemented the “Leading Enterprises Expansion Plan” while well managing such service brands as the industry-finance training base and EDP training, and organized training for key steel enterprises such as HBIS Group and Shanxi Iron and Steel Group and their upstream coking coal and metallurgical coke enterprises, urging the upstream and downstream enterprises in the industry chain to increase their risk management awareness and level. Besides, DCE has intensified market cultivation and organized or supported futures companies to organize training activities for accumulated 8,000 person times.
Next, DCE will keep promoting the functioning of the futures market through continuous innovation and services. First, it will further enrich the risk-avoiding products and instrument system, such as accelerating the listing of scrap steel and gas coal futures and iron ore, coking coal and metallurgical coke options and keeping enriching the results of a diversified and open market. Second, it will innovate and improve market mechanism, research to adjust the quality standards of metallurgical coke contracts, and continue to improve the market operation quality. Third, it will strengthen the over-the-counter market construction, improve the basis trading and swaps platforms, carry out the pilot programs like the “Corporate Risk Management Plan”, and promote the application of commodity swaps, commodity index and basis trading, with an aim of facilitating the better integration of futures’ price-finding and risk management functions into the industry system and keeping increasing the futures price influence and its capacity of serving the real economy.
