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Iron Ore Options Listed, Realizing DCE’s Idea of “1 Completeness, 2 Connects”

Date:10 December 2019
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At 9 o’clock on the morning of December 9, Standing Member of the CPC Dalian Committee and Deputy Mayor of Dalian Luo Dongsheng and Deputy Director of the Futures Supervision Department of the China Securities Regulatory Commission (CSRC) Yan Shaoming jointly strike the gong for the official listing of iron ore options on Dalian Commodity Exchange (DCE), making iron ore the first product realizing “1 completeness, 2 connects”. Yan Shaoming reads out the approval document at the listing ceremony. Luo Dongsheng and DCE Party Chief and Chairman Li Zhengqiang deliver a speech respectively. DCE Deputy Party Chief and CEO Xi Zhiyong presides over the listing ceremony. Guests from relevant state departments, local governments, the industry circle and the financial circle witness the listing ceremony.

Luo Dongsheng says that Dalian, a major iron ore import and export trade center in Northeast Asia, has the only iron ore futures bonded delivery warehouse in China. The iron ore futures has enjoyed increasing international influence since its listing in 2013 and developed into the largest and the only iron ore futures product that is fully physically delivered in the world. The listing of iron ore options today will provide more diversified, convenient and individualized risk management instruments for the industry chain and various market participants, and make the iron ore products complete with futures, options and swaps and connect the spot and futures markets as well as the domestic and overseas markets. In addition, the listing of iron ore options will play a positive role in accelerating the construction of an international iron ore pricing center, optimizing the iron and steel industry risk management system in China, and improving Dalian futures market’s capacity of serving national strategies.

He adds that the Party Central Committee and the State Council released the “Opinions on Supporting the In-depth Reform & Innovation and High-quality Development of Northeast China” this year, which makes a clear requirement on supporting DCE’s development. Dalian will deeply implement the arrangement of the Party Central Committee and the State Council, marshal the full resources of Dalian to assist DCE in building a global commodity pricing center and risk management center, and keep broadening the coverage and increasing the influence of Dalian as a regional financial center.

Li Zhengqiang says that iron ore is the most important basic material for the iron and steel industry. To promote the establishment of an open and rational iron ore pricing mechanism and the balanced and coordinated development of the global iron ore and iron & steel industry, DCE listed the physically-delivered iron ore futures in October 2013 and proposed to construct a derivatives products system which is complete with futures, options and swaps and connects the futures and spots market as well as the domestic and overseas markets for the highly-internationalized iron ore product. DCE rolled out iron ore futures price index in 2017, ushered in overseas traders in May 2018, and launched the swaps business platform in December 2018 and the basis trading platform in September 2019. The listing of iron ore options has realized the idea of “1 completeness& 2 connects” and will truly set up a relatively improved and “open and diversified” derivatives instrument, product and market service system for relevant iron ore industry chains. And it represents a beneficial attempt and major results of DCE deeply serving the high-quality development of the real economy.

He points out that 2020 is the last year of building a moderately prosperous society in an all-round way and of the “13th Five-Year” Plan. It’s also the crucial year of building an “open and diversified” first-class derivatives exchange in the world. DCE will continue to stick to the principle of “consolidation, enrichment and improvement” and strive to make breakthrough in building a commodity pricing center and risk management center, thus contributing to realizing the “two centenary goals”.

It is learnt that there has been solid market basis for the listing of iron ore options. The spot market with integrated global trade pattern has raised urgent demand on iron ore enterprises to manage price fluctuation risks at lower costs and with more elaborate strategies. DCE iron ore futures has presented stable operation and well played functions of the market since its listing in 2013. DCE has successively listed the soybean meal and corn options since 2017, which have shown stable operation and gradually functioning of the market. All these have laid a good foundation for the listing of iron ore options.

In 2018, over 7,000 corporate clients, including iron and steel industry chain enterprises, took part in the iron ore futures trading of DCE, and international trading companies and overseas miners like Cargill and Rio Tinto started to sell iron ore dominated in RMB. Lately, Vale of Brazil and Shandong Laigang Yongfeng Trade Co., Ltd. signed the basis trading contract with DCE iron ore futures price as the benchmark, showing the improvement of the internationalization level and the steady increase of the international influence and pricing capacity of iron ore futures.

Disclaimer: This English translation may be used for reference only. In cases there is any discrepancy between the English version and the original Chinese version, the original Chinese version shall prevail. Dalian Commodity Exchange may change or update this English translation without any prior notice and shall accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or change with regard to this English translation.

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