The Dalian Commodity Exchange (DCE), China’s exchange with futures contracts on steelmaking raw materials including iron ore, will start limiting the daily new open interests of the most-traded May 2021 iron ore contracts since the night trading session of December 4, capping within 10,000 lots/day for certain investors.
According to the DCE notice released late on December 3, investors that are not members or customers of the registered futures companies will only be allowed to add on a maximum of 10,000 lots in their open interests every day including both long and short positions.
Investments for hedging purposes or from market makers will be exempt from the latest regulation, DCE clarified briefly in the notice.
On the very day, DCE also announced to lower the caps on the delivery-related costs for iron ore futures contract effective June 15 2021, which is meant to lower delivery costs, thus to further encourage steel mills to hedge their pricing risks in the physical iron ore market via iron ore futures rimming costs.
DCE’s latest adjustments will cap the truck loading cost at Yuan 8/tonne ($1.2/t) from Yuan 10-15/t, train loading at Yuan 8/t from Yuan 20-23/t, and ship loading cost at Yuan 12/t from Yuan 25-44/t.
Both the efforts have reflected DCE’s long-term resolution to reduce the proportion of speculative trading in its iron ore futures so as to better serving the hedging needs and the interests of the industrial enterprises such as steel mills via the derivatives, Mysteel Global noted.
The iron ore contract on the DCE, as well as the physical iron ore prices, has been experiencing great volatility, with the most-traded 2021 May iron ore contract, for example, closing the daytime trading session of December 4 at Yuan 897.5/dmt, or up Yuan 65.5/dmt from the settlement price of November 27.
Mysteel’s SEADEX 62% Australian Fines, at the same time, reached $130/dmt on November 27, and it had persisted above the level or gained $7.95/dmt by December 3 to $137.95/dmt, or a new high since December 5, 2013. All prices are in terms of CFR Qingdao.
Written by Hongmei Li, li.hongmei@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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