China's Dalian Studies Launch of Night Trade in Iron Ore Futures

2014-12-05

China's Dalian Commodity Exchange is looking at starting overnight trade in iron ore futures, which would give investors the chance to deal when Western markets are open and respond more promptly to volatility.

Aiming to establish them as benchmarks in the international marketChina, the world's top consumer of a raft of commodities ranging from steel to copper , has rolled out a series of future contracts in recent years.

The exchange will conduct tests of overnight trading in several futures contracts including soybeans, coking coal and iron ore this weekend during the night of Dec. 6-7, which is said in an announcement on its website.

"Market players have shown a growing interest, so we believe iron ore is suitable for overnight trade after conducting research. But we will make the final decision on whether or when to launch official overnight trading for the contract after reviewing the test results," spokesman Wang Weijun said.

The contract, launched in October 2013, has given Chinese investors more influence on the pricing of a commodity which has fallen about 43 percent this year.

"Overnight trade may not attract large trading volume at first, but we have to say that Dalian's iron ore futures have been quite successful as a key market indicator," said an iron ore futures trader in Shanghai.

Oversea companies are not allowed to invest directly in Chinese commodity futures, but their units registered in China are able to participate.

Due to a persistent supply glut, the sharp fall in iron ore prices this year has been fuelled in part by Chinese speculators who built up huge short positions.

The exchange is also planning to launch a corn starch futures contract and will conduct test trading on this over the weekend, too. This latest derivative product is aimed at giving processors and other downstream users more hedging tools.