Caixin
Feb 03, 2018 07:11 AM
FINANCE

China Moves to Open Iron-Ore Futures Market to Foreign Investors

China is the world’s largest iron-ore consumer, with annual imports totaling 1.1 billion tons in 2017, representing 68% of the world’s total global shipments. Photo: Visual China
China is the world’s largest iron-ore consumer, with annual imports totaling 1.1 billion tons in 2017, representing 68% of the world’s total global shipments. Photo: Visual China

China is preparing to open up its iron-ore futures trading to foreigners, a key step by the world’s biggest consumer of the commodity toward gaining greater sway over global pricing.

Right now, Chinese buyers don’t always get the best prices for iron ore partly because its locals-only Dalian Commodity Exchange doesn’t have pricing power outside the country.

The shift will mean that domestic and foreign investors will bid and trade on the same platform, helping to create an internationally recognized, fair and transparent iron-ore futures benchmark. That will give China more clout in global price-setting for the commodity, executives at the Dalian exchange said.

Caixin learned that the exchange will soon begin to solicit public opinions on the draft rules for the change. Preparations are underway, though China Securities Regulatory Commission spokesman Chang Depeng didn’t disclose a time frame on Friday at a news conference.

China imported nearly 1.1 billion tons of iron ore in 2017, accounting for 68% of total global shipments. Since Dalian launched its iron-ore futures contract in 2013, active trading of the contract has made the exchange the world’s largest iron-ore derivatives market.

The step to open up iron-ore futures trading is part of a broader move by the Chinese government to bring in more foreign investors to its commodities exchanges and expand the country’s influence in global markets.

As early as next month, the Shanghai International Energy Exchange, a unit of the Shanghai Futures Exchange, is expected to launch a long-awaited Chinese oil futures contract. It will be the first contract priced in yuan to be open to foreign investors. Right now, West Texas Intermediate (WTI) on the New York Mercantile Exchange and Brent on the London-based ICE Futures Europe are the global benchmarks commonly used to determine oil prices.

The Zhengzhou Commodities Exchange is also actively searching for ways to be involved in international derivative markets.


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