.jpg)
To further promote the functioning of the futures market and its role in serving the real economy and the industrial development, Dalian Commodity Exchange (DCE) recently held the “Forum on Iron Ore Futures Serving Industries” in Qingdao, comprehensively listening to the opinions in the market on the contracts and the system of rules of the iron ore. Attending the forum at the invitation were the representatives from over 20 iron and steel enterprises, large-sized trading companies, investment institutions, warehousing enterprises and quality inspection organizations.
At the forum, the attendees spoke highly of the iron ore futures contracts on the DCE. According to them, the domestic iron ore futures contract is well positioned and in line with the characteristics of spot trade as the 62% iron grade fine ore is the most representative product on the spot market. Since the launch of the contracts, the futures prices have correctly reflected the value of the mainstream ore products such as Newman fines and PB fines; the selection of the main spot trade ports of iron ore as the delivery sites is in line with the trade flow. The scientific and rational designing of the contracts and delivery sites has made the iron ore one of the futures listed in recent two years with the most successful operation. The sufficient liquidity and the highly correlated futures and spot prices have not only provided the industrial hedging clients with a sound trading environment and lower transaction costs, but also played a key role in increasingly improving the influence of the domestic iron ore futures in the international market.
The representatives present at the forum focused on discussing and assessing the issue of delivery costs. Some industrial clients said that there is still space for further reducing the costs in futures delivery.
In terms of the structure of active contracts, some industrial clients pointed out that most of the orders in spot trade are for the goods to be delivered within 2 months, but as the front-month contracts of domestic iron ore are not very active and the dominant contracts are not consecutive, such a characteristic has affected the efficiency of the enterprises using the futures market in hedging. They hoped that DCE could further improve the liquidity of contracts in an all-round manner.
The attendees also discussed and assessed the tick sizes, the premiums and discounts for location, the intraday position limits and losses in delivery, etc. Meanwhile, all agree that as currently the iron ore futures have been running smoothly and functioning well, we should not make great changes to the contract system in the future during the process of cutting down delivery costs, improving the consecutiveness of the futures contracts and making other improvement, so as not to disturb the market pattern and rules and affect the functioning of the futures market in service.
Chen Wei, Director of the Industrial Products Department of DCE, said that currently DCE is making effort to further optimize the rules related to the iron ore futures. For example, it is considering launching a warehouse receipts market maker system, in order to eliminate clients’ hesitation to participate in delivery, improve the liquidity of the front-month contracts, and better facilitate the industrial enterprises’ utilization of futures. With regard to the issue of further reducing the delivery costs, DCE has formed the preliminary solution and will, based on actual market conditions, comprehensively consider the demand of all participants, effectively assess the impacts on the market, and well arrange the timing for introduction, so as to ensure its orderly and steady implementation.
