DCE finalizes brands for iron ore futures delivery
Source: Mysteel
Sep 17, 2019 18:30
DCE’s initial listing benchmark price of the September 2020 futures contract, announced by the exchange at the beginning of the night session on September 16, was Yuan 600.5/dmt ($84.9/dmt), with the contract closing at Yuan 552.5/dmt by the end of day time session on September 17. DCE had been studying iron ore physical delivery by brand since the second half of 2018, Mysteel Global understands.
“We think this new procedure for delivery will help to avoid violent fluctuations before the delivery of iron ore futures contracts, with the deliverable product brands only including those widely consumed by Chinese steel mills,” a Shanghai-based analyst commented.
“With the existing standards, deliveries of more iron ore products can be applied for but with less liquidity among steel mills, which is not good for final buyers and weakens the guidance function of the DCE iron ore price – which definitely, DCE does not want to see!” he explained.
While welcoming the change, another iron ore analyst with a Fujian-based futures company noted that it might be still too early to say what kind of impact the new system would have on the market. “After all, the most-traded iron ore futures contract currently is for next January delivery,” he told Mysteel Global.
The DCE launched iron ore futures trading on October 18 2013, but delivery volumes have been rather low and in marked contrast to trading volumes. During January-August this year, the delivery volume reached 6.9 million tonnes, which was about half the volume recorded during the first eight months of last year. However, during September 1-17 alone, trading volume had reached 30.44 billion tonnes on a double counting basis, according to DCE’s data.
Meanwhile, also on Monday DCE launched simulation trading of iron ore options, though the trading time is limited to daytime sessions, Mysteel Global has learned. Early last year, DCE submitted an application for launching iron ore options to the China Securities Regulatory Commission, saying it hoped to enrich its basket of iron ore derivative products, which may help to solve the issue of lack of continuity of iron ore futures contracts, as Mysteel Global reported. When iron ore options trading might formally start remains unclear, however.
Written by Victoria Zou, zyongjia@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
Deliverable Brands and Relevant Premiums and Discounts of Iron Ore Futures of Dalian Commodity Exchange
Source: DCE
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