In another attempt to take the steam out of overheated iron ore prices, the Dalian Commodity Exchange (DCE), headquartered in Northeast China’s Liaoning province, has imposed a trading limit on some iron ore futures contracts effective from the night-time trading session of February 21 and from February 22, the exchange announced in a notice on Tuesday. The move marked the exchange’s second this month to temper the surge in ore prices, Mysteel Global notes.
DCE tightened the trading volume limits, including those on opening long and short positions, to 1,000 lots/day on ore futures contracts for May, June, July, August and September delivery for non-futures company members or clients, the notice said. The limit on other iron ore contracts is capped at 2,000 lots/d, though market makers trading for hedging purposes or for similar purposes are exempt from the restrictions.
Previously, the limit of all DCE iron ore contracts had been reduced to 2,000 lots/d in December 2020, as reported.
“The DCE’s latest announcement is an attempt to curb speculation when iron ore prices are soaring, by preventing a small number of traders with large trading volumes to manipulate the market,” a Shanghai-based iron ore analyst from a futures company commented.
China’s prices for imported iron ore have been climbing higher in recent weeks, pushed up by renewed optimism about a revival in steel demand and the construction industry’s positive response to economic stimulus packages announced by the central government, Mysteel Global noted.
Derivatives prices have continued to rally, despite the DCE’s warning to iron ore market participants on February 17 of the need to manage risks. Just days later on February 21, Mysteel SEADEX 62% Australian Fines climbed to an eight-month high of $131.55/dmt CFR Qingdao, up for the sixth working day and by a larger $2.65/dmt on day.
The market has gained more confidence from improved steel consumption, evidenced by more sales of finished steel these days, and leading to a sharper increase in ore prices, the analyst explained.
During February 20 and 21, the daily trading volume of construction steel comprising rebar, wire rod and bar-in-coil among the 237 Chinese trading houses under Mysteel’s tracking reached 200,117 tonnes/day and 186,061 t/d respectively, up from the prior week’s average of 143,903 t/d.
“It is hard to see the current market optimism reversing completely any time soon,” the source commented, adding that the DCE’s attempt may have little effect on cooling iron ore prices.
In fact, the exchange’s most-traded iron ore contract for May delivery closed the morning session of February 22 at Yuan 914.5/dmt, or Yuan 1.5/dmt higher than the settlement price on February 21.
Written by Lea Li, liye@mysteel.com
Edited by Zhenqi Yang, yangzhenqi@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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