Wang Qiaoqi, Vice President of the China Iron and Steel Association, said at the 2014 China Coal, Coke and Steel Industries Conference in Qingdao on August 21 that iron ore futures had saw sound operation and good display of its functions on Dalian Commodity Exchange (DCE), and it had been accepted by market participants both at home and abroad as a price-finding instrument. The conference was co-sponsored by the China National Coal Association (CNCA), the China Iron and Steel Association (CISA), and Dalian Commodity Exchange (DCE) and organized by www.mysteel.com.
At his keynote speech, Wang praised the good display of iron ore futures’ functions on DCE and the continuous improvement of futures products in China’s iron and steel industry. He said that under the precondition of its sound operation and increasingly strengthened liquidity, the futures market would serve the spot market well and give full play to its price-finding function, which had been proved by the iron ore futures on DCE. Presently, the iron ore futures had been accepted by market participants both at home and abroad as a price-finding instrument in addition to the spot index.
Wang said that it was very hard to judge the market trend when no iron ore futures was provided two years ago. The sound operation of the iron ore futures and full display of its price-finding function provided references for market participants, which made nearly same judgment on the market trend. He added that as price of iron ore futures was transparent and correct, all the market participants paid attention to it. Thanks to price of iron ore futures, the price spread for iron ore transactions between buyers and sellers or services provided by intermediaries lowered to US$ 1 per ton, which thoroughly changed the wild speculation caused by asymmetric information. By taking advantage of the iron ore futures market on DCE, iron ore mines, steel factories, traders, and futures companies could get the same information. Relevant enterprises would have much less troubles in their production and operation caused by asymmetric information, if they actively pay attention to and participate in the iron ore market.
He stressed that with a guideline of serving for the Chinese industries, the Chinese future markets, represented by DCE, were continuously perfecting futures products (including raw materials and products) in the iron and steel industry, and providing effective hedging instruments for iron and steel enterprises to remove market risks and guide production and operation. Under the escorting of the futures market, the iron and steel market had been improved as well, as it guided production and hedging according to the futures market price in recent years instead of getting confused about the coal and iron ore prices.
When it came to the current situation of the China’s iron and steel industry, Wang said that the industry with good traditions was facing unprecedented difficulties, while positive changes were taking place inside and outside the industry. He said that the iron and steel industry was experiencing an in-depth reform, with investment and expansion being curbed as well as technological innovation and environmental protection strengthened, and a batch of advanced companies became leaders in the industry. Besides, the external environment for the iron and ore industry saw positive changes: the governmental administration on the iron and ore industry was experiencing fundamental changes; the short supply of raw materials was relieved as the growth of the iron and steel industry was decelerated; the iron and steel market building had achieved great progresses.
As of June 2014, the transactions of iron ore futures had accumulatively reached 94,536,400 contracts (bilaterally, the same below), with the trading volume up to RMB 6.88 trillion. The number of the corporate clients trading iron ore futures had been 1,856, including mines, iron and steel enterprises, traders, as well as funds, private placements, futures assets management companies, and other institutional investors, as well as 47 foreign-funded enterprises. Preliminarily, a structure of diversified clients had come into being.