Reed Smith Client Alerts

Hot on the heels of the Shanghai International Energy Exchange (INE)’s launch of a new crude oil futures contract, which has been made available to overseas investors, the Dalian Commodity Exchange (DCE) has announced that their existing iron ore futures contract will be made accessible to overseas investors. The DCE published its final rules on 27 March 2018.

This client briefing seeks to discuss:

  • the main features of the DCE iron ore futures contract;
  • the two routes by which the overseas investor can access the iron ore futures contract;
  • its settlement through physical delivery feature; and
  • the general trends which may emerge as a result of the INE and the DCE’s decisions to make commodities futures contracts available to overseas investors

Authors: Peter Zaman Katherine Yang Kate Whelan Charlotte Simpson

The quality specification for the DCE iron ore futures contract is comparable to the standardised specification used on Platts IODEX. Delivery units are 100 metric tonnes per lot; the maximum size of the contract is 1,000 lots and the contract is listed monthly (for the most recent 12 consecutive months). The minimum margin is set at 5% of the contract value. The contract is denominated in renminbi (RMB) but U.S. dollars (USD) can be deposited for use as collateral and offshore RMB (a.k.a., Chinese yuan (CNY)) can be deposited and directly used to participate in the futures trading at a 1:1 ratio. By comparison with the INE crude oil contract, the DCE iron ore contract price is duty paid rather than a net price, and delivery under the iron ore contract includes both bonded and duty-paid delivery modes.