China to open up iron ore futures to foreign investors

[SHANGHAI] China is planning to open up the world's most liquid iron ore futures to overseas investors, an official with the Dalian Commodity Exchange said on Friday, a move that would increase China's sway over pricing as the world's top iron ore consumer.

The Dalian exchange is applying for approval from the China Securities Regulatory Commission to allow offshore investors to directly trade in the raw material, said Jing Mingyi, a manager with the exchange's industrial products department.

"We are actively working on it and hope to finish the relevant work regarding the trading system, connection with banks, deposit centre and futures firms," Jing told an industry conference.

China has banned investors abroad from directly trading local commodity futures unless they set up a local unit in China.

Dalian iron ore futures have become a benchmark for Chinese steelmakers and iron ore traders to assess prices for ore delivered to China.

They have also attracted large capital flows from Chinese commodities funds. The iron ore contract surged as much as 19.5 per cent in a day in March amid a rally in prices. The volatility prompted the Dalian Exchange to enact measures to curb the sharp movements in prices.

The most actively traded September contract on the Dalian Exchange was down 0.1 per cent on Friday at 377 yuan (S$78.78) a tonne.

REUTERS