Iron ore ** influence strong

Many steel mills increase their direct supply ratios through the construction of steel logistics projects, distribution and processing and distribution centers, enhanced strategic cooperation with end-users, development of e-commerce platforms, and participation in trade, and enhance market competitiveness and overall profitability. Today, this edition publishes a series of articles to discuss with readers' friends how to improve the steel and steel materials e-commerce platform, the effectiveness of the introduction of trade, the future direction of development of steel and iron companies, and the construction of steel companies' own sales channels. The transparency of steel and steel raw material prices at the same time, prompting companies to better manage price risk and manage cash flow.

Thanks to the design of a good spot basis and innovative physical delivery, the Dalian Iron and Steel Exchange (hereinafter referred to as “Dashang”) has received extensive attention from home and abroad since its listing. At present, the price formation mechanism and pricing model of iron ore are increasingly affected by it. For the development of the next step, the relevant person in charge of the Dashang Group recently told the reporter of China Metallurgical News that DCE will focus on service industry customers and promote internationalization in order to further expand influence and optimize investor structure.

Transparent liquidity

According to the data released by Dashang, in the 124 trading days between October 18 last year and April 18 of last year, the cumulative turnover of iron ore** was 17.0739 million (based on unilateral calculation, the same below), with a total turnover of 13708.60. Billion yuan, average daily turnover of 137,700 contracts, average daily position of 152,400 contracts, average daily turnover rate of 0.76, average daily short-term ratio of 56.65%, already has the market scale of real economy management price risk. Since its listing, the cumulative turnover of DCE iron ore ** has reached 1.707 billion tons, which is 13 times that of the Singapore SGX swap and 58 times that of the **, compared with other international iron ore derivatives. US CME** At 165 times that of India's ICEX**, it has become the most active iron ore derivative in the world.

The number of industrial customers participating also began to take shape. Among them, more than 260 domestic and foreign traders such as Sinosteel Group and Shandong Wanbao Group participated in the transaction, accounting for 24.3% of the transactions; 41 steel companies including Jiangsu Shagang Group, Rizhao Steel, and Shandong Iron & Steel participated in the iron ore trade. The proportion was 4.8%; however, the number of mining companies involved was still relatively small. As of mid-April, there were only 5 companies with a turnover of 0.1%. In addition, 47 companies with a foreign investment background participated in the transaction, accounting for more than 7% of the transaction volume.

While the liquidity and transaction scale have been continuously strengthened, its transparency has also been recognized by all parties. At the recent symposium on the operation of iron ore ** held by the Dashang Group, the representative of the China Iron and Steel Association stated that compared with the price of iron ore, we now want to talk about the fairness and fairness of price formation. It is open and transparent, and this was achieved after iron ore ** went public last year.

Representatives of a large steel company in Northeast China also stated at the meeting that at present, some iron ore price indices at home and abroad are not publicly disclosed, and there are obvious deficiencies in transparency. “The key is the number of samples and the number of real deals, as well as the weight of the prices associated with steel production, instead of calling to ask what the quotes are, and then adopting them. These are not the same.” He said.

Rising influence

As the seller of iron ore ** for the first time, Shagang’s use of ** is relatively early, and the earliest hedging by rebar **. Shagang representatives said at the meeting that after the listing of iron ore **, it had a significant impact on iron ore (spot) prices and various indices, and this effect was formed through market transactions. "The Dalian Commodity Exchange's ** is a real-time trader's price formed with its own participation. The liquidity is very strong, and the amount is very large. It will play a very good price discovery role for the entire market price formation." he thinks.

Qian Jin, deputy general manager of China Steel Trading Co., Ltd., believes that the impact of the price of iron ore ** in DCE is reflected in the actual business. “We had some time to chat with customers when we had a chat and wanted to sell some of our cash, but after he saw the situation of the closing of the Dachang Securities (declining close), he did not bargain and said that he would not buy it today,” he said.

In addition, iron ore ** has also affected the changes in the price chain relationship of the industrial chain, in particular, breaking the “iron ore ** before the listing, the Platts index showed a rapid rise in prices following the rebar **, or a large decline Small phenomenon." According to the data of Dashang, after the listing of iron ore **, the Platts' index was higher than the rebar's starting point by 6 days, the slowest lag of 19 days, and the current almost simultaneous start. In the course of the downturn, the Platts index was above the rebar start point, from an average of 7 days behind, the slowest lag of 32 days, to the current average lead two days. In terms of price fluctuations, the average Platts gain has been 1.94 times that of the rebar, while the average decline is only 1.24 times. At present, the two are very close.

More expectation

The relevant person in charge of Dashang believes that since the listing of iron ore **, the overall market operation has been stable, but there are still some deficiencies. “From the point of view of total industrial customer participation, there is still a lot of room for growth compared with the existing industry scale. In addition, it is still a relatively closed market. Market participants are still limited to domestic companies. It is really necessary to further enhance their influence. To compete for international discourse rights, overseas market participants are also needed. The next step is to do a good job,” he pointed out at the meeting.

The representative from the China Iron and Steel Association believes that China’s dependence on iron ore imports is close to 70%. If there is no foreign major iron ore supplier’s participation, the entity’s global services in terms of price discovery, hedging and other basic functions On the other hand, there are still shortcomings.

According to Xin Weihua, chairman of Shandong Wanbao Group, which has imported 15.5 million tons of imported iron ore from Shandong, a large spot iron ore trader in 2013, there is still much room for improvement in the proportion of steel mills and traders participating. The more people involved, the more active the market will be, and the more active it will be, the better it will be to discover prices. It will also help to increase the influence of DCE iron ore in the country and even the world. Manufacturers and traders will also be better. To avoid the risks of the industrial raw material market.

The relevant person in charge of Dashang stated that in the next step, they will strictly adhere to the bottom line of risks and continue to do daily trading, liquidation, monitoring, delivery, etc., and do deep training to achieve the realization of goods companies, and constantly improve the domestic steel companies, mining companies Market participation; at the same time study and promote iron ore ** bonded delivery, explore the promotion of overseas qualified investors to directly participate in iron ore ** transactions denominated in ***, and gradually increase the international influence of iron ore ** price and The right to speak.