Iron Ore Futures Trading for Physical Delivery Booms with Easing of Cash Liquidity

The easing of cash liquidity was the major reason behind booming transactions for iron ore futures, Steelease believed. 

 

The restrictions on financing have been eased somewhat since the beginning of July, as some banks have begun cutting the L/C margin ratio for reliable steel mills and traders. 

 

Banks’ action to raise L/C margin ratio in June was taken to reduce risk exposure after the Qingdao financing scandal in early June. The increase in L/C margin ratio also, on the other hand, helped ease some pressures of banks, which usually are busy in holding or attracting deposits every June.  

 

Trading for futures goods, however, will likely wane, Steelease foresees, and in the long-term run, the price of iron ore futures for spot delivery is expected to have a big room to fall. China’s ports are going to face a growing supply pressure with the upcoming arrivals of futures goods traded in June, and this will weigh down spot prices at ports. This, combined with the easing of liquidity conditions, will stimulate spot buying activities, which will reduce trading enthusiasm in futures goods.