The Dalian Commodity Exchange has imposed a limit of 15,000 lots per day on trading of its September iron ore futures contract and 10,000 lots per day on its January futures contract -- the exchange's most actively traded iron ore contracts -- with effect from Aug. 5, according to a notice the exchange released on Aug. 4.
The DCE note specifically states that the combined trading volume of opening long and short positions on all iron ore futures contract tenors by a single company or individual should not exceed 15,000 lots and 10,000 lots for September and January contracts, respectively, which corresponds to 1.5 million mt and 1 million mt of iron ore per day.
The daily limit imposes restrictions, which took effect during the Aug.4 night trading session, on non-futures company members and clients, but exempts hedging and market-making trading volume for opening positions.
Industry sources interpreted the latest limits on the two most traded contracts as a follow-up to the June 15 cap on total trading volume at 30,000 lots per day, to continue to curb speculation as the strong rally on iron ore prices persisted.
The benchmark S&P Global Platts IODEX assessments hit a fresh 12-month high of $118.45/dry mt on Aug. 5 and has jumped 41.3% since the beginning of May. The marker had also surged 48.4% from the year-to-date low of $79.80/dmt recorded on February 3.
"The measure was to further optimize the structure of iron ore futures market, improve operation quality, thereby facilitate futures market functions and to better serve steel mills with effective derivatives tools," DCE said in a separate statement posted on its website.
Several broker sources said such measures to curb speculation are necessary, but the impact on the market was marginal because the restriction did not affect the bulk of the trading volumes.
According to DCE's data, on Aug. 5, daily trading volume for all iron ore contracts stood at 887,359 lots, among which 20 futures company members traded 670,810 lots, representing 75.6% of the total volume, while the remaining 24.4% were subjected to the new measure.
Market participants remain bullish on the short term fundamentals for iron ore as strong Chinese infrastructure and construction sectors continue to support iron ore demand, while structural tightness for liquid brands sustain the supply side, industry sources said. Capital inflows in ferrous markets has also propped up Chinese domestic iron ore prices.
The most actively traded iron ore contract for September 2020 delivery opened at Yuan 891/mt on June 6, and closed at Yuan 909.5/mt, 2.83% higher from the previous settlement, after reaching the peak Yuan 913.5/mt during the morning trading session.
The Platts 62% Fe iron ore port stock index, or IOPEX North China, was assessed at Yuan 903/wmt FOT Aug. 5, up Yuan 3/wmt on the day, or at $121.22/dmt on an import parity basis. IOPEX East China was assessed at Yuan 910/wmt FOT on Aug. 5, up Yuan 4/wmt on the day, or at $122.11 /dmt on an import parity basis.
