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On the morning of October 18, the world's first iron ore futures contracts featuring physical delivery that have been highly concerned by all the parties were listed and traded on Dalian Commodity Exchange (DCE), symbolizing that the “China-version” iron ore futures, as a milestone in the development of China’s iron and steel industry, have officially set sail. It is the eleventh futures product listed on DCE, increasing the number of China’s futures products to 36.
At the “gathering marking the iron ore futures listing and forum on the iron ore futures serving the real economy” held on the morning, Liu Xingqiang, Party Chief and President and General Manager of DCE, said in his speech that the iron ore futures are a new product that is widely concerned in the industry. Although the foreign exchanges have introduced the forms of index trading and swaps trading of the iron ore earlier, the iron ore futures to be launched by DCE are the first contracts with physical delivery in the world, and it is hoped that the physical delivery will make the pricing of the iron ore, an international bulk commodity, more reflect the actual supply and demand as well as the process of forming the commodity prices, so as to improve the openness and transparency of the trade of the commodity.
Liu said that we are clearly aware that the listing of the iron ore futures is only the “first step of the Long March”. As the iron ore is a highly international bulk commodity, whether the iron ore futures on DCE could be recognized in the industry and the industrial sectors and by the enterprises of international trade will pose an extremely arduous challenge in innovations to DEC, including the changes to the trading system and the means of risks control that have developed in DCE for years. In China’s mainstream of deepening the reform, DCE will continue to hold high the banner of reform and innovation, and develop the iron ore futures into the best highlight of DCE by focusing on the purposes of serving the market, the industries and the investors as well as develop itself into a futures exchange with greater international influence in the process.
Liu also said that inspecting DCE not long ago, General Secretary Xi Jinping encouraged DEC to come down to earth and make audacious explorations. DCE will live up to Xi’s expectations, spare no effort and make greater contributions to the healthy development of China's futures market and better serving the national economy.
When addressing the meeting, Wang Xiaoqi, vice president of China Iron and Steel Industry Association, pointed out that the current iron ore pricing mechanism is not entirely determined by the supply and demand relationship with the mainstream pricing mode referring to the international iron ore price indexes, which are based on a small number of samples that are to determine the overall market prices. The pricing mechanism was formed mainly because the iron ore suppliers are relatively concentrated and take the dominant position while the domestic steel mills are scattered with lack of bargaining power in market pricing. The introduction of the iron ore futures is of great importance for exploring the establishment of a more just, objective and transparent iron ore pricing mechanism and helping the iron and steel enterprises manage the risks of price volatility.
Wang also said that the operation of financial derivatives has its own peculiarities, especially for the iron ore, a dry bulk commodity, which sees big difficulties in designing, and DCE has made many efforts in this respect as well as innovations in the system. He hoped that DCE could make persistent efforts, keep close attention to changes in the market, strengthen the supervision on the market, ensure the smooth operation of the iron ore futures on the market and give full play to its functions in serving the market. He also hoped that DCE could consistently step up the training efforts for the industries in the market and help the enterprises get familiar with the futures tools as soon as possible. The China Iron and steel Association is ready to make joint efforts and enhance cooperation with DCE to contribute to promoting the functioning of the iron ore futures market and maintaining the healthy development of the iron and steel industry.
Song Anping, Director of No. 1 Futures Department of China Securities Regulatory Commission (CSRC), read out the “Official Reply on Approving the Listing of the Iron Ore Futures on Dalian Commodity Exchange” issued by the CSRC. Cao Aihua, Executive Vice Mayor of Dalian City, read out the congratulatory letter sent by Dalian Municipal CPC Committee and Government to DCE. The congratulatory letter said that as a fundamental and strategic commodity important for the national economy, the iron ore plays a crucial role in the development of the iron and steel industry in China. As an important symbol of the improvement of the iron ore market system and the promotion of the marketization and internationalization of the iron and steel industry, the listing of the iron ore futures contracts is a prominent achievement in China’s development of the futures market and is of great significance for enhancing the capability of Dalian futures market in serving the real economy, speeding up building the important futures center in Asia, promoting the construction of Dalian as a regional financial center, and improving the city's comprehensive competitiveness.
Attending the event were the representatives from relevant ministries and commissions, industry organizations, research institutes and the enterprises including Shougang Group, Anshan Steel, Wuhan Iron and Steel, Hebei Iron and Steel, Qingdao Port, Lianyungang Port, Caofeidian Port, BHP Billiton, Rio Tinto, CVRD and other mining and metallurgical enterprises.
