In order to implement the plan to “promote futures markets for treasury bonds and commodities including coal, iron ore and crude oil” in the Opinions on the Key Focus of Furthering Economic Reform in 2013 (State Council [2013] No.20), the CSRC has recently approved the trading of iron ore futures at Dalian Commodity Exchange (hereinafter referred to as “the DCE”). In accordance with relevant stipulations of the Regulation on the Administration of Futures Trading and the Provisions on the Administration of Futures Exchanges, upon the completion of all preparations and due procedures, the CSRC will approve the iron ore futures contracts to be listed on the DCE.

Iron ore is the most crucial raw material for steel production. In 2012, the world iron ore output stood at 1.86 tons and the trading volume at 1.13 tons. The world production and trade of iron ore is quite concentrated, with Australia, China, Brazil and India accounting for approximately 80% of the total output. As the second largest producer, number one importer and the largest spot market of iron ore in the world, China’s production and consumption of iron ore is mainly concentrated in Pan-Bohai Sea and surrounding regions in the North of China, which is also the main area for the import of iron ore. In 2012, China has reached 440 million tons in iron ore production, 740 million tons in import and 1.05 billion tons in consumption, with an import dependency of over 60%.

In recent years, regarding international trading price for iron ore, the previous pricing method through “long-term agreement” negotiations has given way to index pricing based on cash commodity trading, causing wild and frequent price fluctuations. Consequently, commercial enterprises have been faced with major risks caused by the fluctuations. The listing of iron ore futures in China will help build a pricing system which truthfully reflects the market supply and demand in China, aiding enterprises in managing price fluctuation risks, enhancing the safeguard for our iron ore resources and boost China’s influence on the pricing of the international iron ore markets.

After thorough research and investigation and based on the spot market reality and the technical requirement for futures contract design, the DCE has completed the preliminary design for the iron ore futures contract and corresponding rules, determining the underlying product with highly representative price, drafting strict trading, settlement and delivery rules and discussing risk control requirements with regard to futures margins, price limits and position limits. While ensuring that market risks can be measured, controlled and tolerated, the CSRC will approve iron ore futures contracts to be listed on the DCE in accordance with relevant laws and regulations and guide the DCE and futures firms to carry out pre-listing training and investor education, in order to ensure the steady launch and operation of iron ore futures.