SHFE to Launch Iron Ore Futures

SHANGHAI, Dec. 5 (SMM) -- Shanghai Futures Exchange will launch futures for multi-products, especially for petroleum and iron ore, which was disclosed by Yang Maijun at the Seventh China International Futures Conference recently.

According to Yang Maijun, crude oil and iron ore are important strategic resources, but China lacks according futures at present. The successful operation of fuel oil contracts at SHFE provides valuable experience for the launch of crude oil futures contract. Steel futures contracts also operate smoothly at SHFE, which will be served as guidance for launch of iron ore futures contract as well.

However, Yang Maijun pointed out that China’s poor pricing power for commodities is mainly due to the fact that China’s futures market only covers limited participants. At present, participants at SHFE are mainly domestic players, only reflecting supply and demand in domestic market. Therefore, futures prices at SHFE are not widely recognized by international market, which can not be used as a hedging tool for multi-national entities.

Currently, iron ore futures is only launched by Singapore Mercantile Exchange, and jointly launched by Indian Commodity Exchange (ICEX) and Multi Commodity Exchange (MCX). According to statistics, annual market value for iron roe is around USD 200 billion, only next to crude oil, with more than USD 100 billion value from China. China’s output of domestic iron ore was around 300 million mt (including 62% iron ore), and China’s imported iron ore was around 600 million mt in 2010. It is expected that China’s imports of iron ore and output of iron ore will continue to advance in 2011. As the largest iron consumer in the world, China is very necessary to launch its own iron ore futures market in order to increase iron ore pricing power in international market.