DCE limits trading lots on most-traded iron ore contracts

The Dalian Commodity Exchange (DCE) has imposed trading lot limits on its September and January iron ore futures contracts starting August 5 or since the night trading session of August 4, which is intended to "stabilize the market operations, and to minimize market risks", according to its notice on late Tuesday.

DCE requests that for the individual investors and companies that are not members of any futures companies, their daily trading volume including buying and selling should not exceed 15,000 lots for the September contract or 10,000 lots for the January contract, explaining that those trading for the hedging purpose or conducted by the market makers will be exempted from the limits.

Other than the immediate control, DCE will review the accounts and combine those under one actual controller into a single account and regulate accordingly, and it will adjust the trading limits whenever the market situation calls for the action.

"The trading limits can be interpreted as one of DCE's measures to limit the market volatility, especially when the volatility is suspected to have been triggered by speculative trading," a Shanghai-based iron ore analyst from a futures company commented, though, the "actual result may be limited".

Recently, China's iron ore prices in both the futures and physical markets has been refreshing their one-year highs frequently, and the DCE's September iron ore contract closed at 890/dmt on August 4, or up Yuan 28.5/dmt from the settlement price of August 3, and Mysteel's PORTDEX 62% Fe Australian Fines rallied to Yuan 905/wmt FOT Qingdao and including the 13% VAT on Tuesday, or a new high since July 19 2019.

With the cooling efforts in place, the DCE September iron ore contract closed morning session of August 5 at Yuan 887.5/dmt, or up just Yuan 3/dmt from the settlement price of August 4.

The ever-surging iron ore prices since the start of this year in contrast to depressed steel prices have already caught attention from many governing bodies so far this year, and China's National Development and Reform Commission, the Ministry of Industry and Information Technology, and the China Iron and Steel Association have all warned of the irrationally high iron ore prices on many occasions, Mysteel Global noted.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.