China to open up iron ore futures market

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Loading of iron ore at a iron site. Photo: iStock

China is planning to open up its iron ore futures trading to foreign investors, commencing May 4, The Economic Observer reported. The shift will mean that domestic and foreign investors will bid and trade on the same platform.

An insider from GF Futures thinks it will help create an internationally recognized iron ore futures benchmark. Thus, it will play a more significant role as a hedging tool against spot iron ore price fluctuations.

At the same time, the opening up of iron ore futures will provide a new pricing model for international trade.

International mining and other industrial customers have already considered participating in China’s futures trading, aiming to guide the global price-setting for the commodity.

At present, the international iron ore trade is priced predominantly by the Platts Index. Buyers and sellers quote and negotiate on the basis of the Platts Index on the day or in a period of time.

According to a purchasing manager of a steel factory in North China, the spot price of renminbi-denominated iron ore at the port does not match very well with the pricing based on Platts Index.

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