The development boom of iron ore futures in the international financial market has arrived. Recently, Chicago, Singapore, and India have all launched their own iron ore futures products. Regardless of whether China is willing to launch iron ore futures or not, the financialization of the iron ore market is inevitable.

At the 2013 International Iron Ore Conference held in Qingdao yesterday, international financial trading institutions introduced their iron ore futures products one after another.

The Chicago Mercantile Exchange (CME) has announced that it will launch electronic trading of iron ore futures contracts in May this year. On the basis of its original swap transaction, the Singapore Exchange has launched iron ore futures on April 8. At present, Singapore Exchange, Singapore Commercial Exchange and India Commodity Exchange have launched iron ore futures.

Obviously, the financialization of the iron ore market has become a consensus in the market, and the futures market helps to establish a fair and transparent pricing system and compete for international trade pricing power. At present, the pricing of iron ore trade is in a diversified stage, with pricing models such as indices, long-term agreements, and spot prices coexisting. However, due to the irrationality of each model, there has not yet been a widely recognized model in the market.

Especially in January of this year, under high supply and demand pressure, the index price was only determined by the bidding price of several hundred thousand tons of two or three ships, which determined the pricing of millions of tons of iron ore in the entire market at 160 US dollars per ton, a significant increase of over 30% compared to the previous month. This is extremely unfair to China, the world's largest buyer.

In the current international market where iron ore futures are being launched one after another to seize the opportunity in the international iron ore market, it is better to push domestic iron ore futures late than early, and to use foreign markets is better than to use one's own market. If we cannot fully utilize our own advantages to launch China's iron ore futures as soon as possible, our steel industry will be at a disadvantage for a long time after further consolidating the unreasonable index pricing model in international iron ore derivative trading.

At present, the only drawback in the domestic coal coke steel industry chain is the lack of listed iron ore futures. In the context of huge inventory and significant risk of price decline throughout the entire industrial chain, the futures market undoubtedly provides a good risk management tool.

Through the futures market, steel companies can avoid significant inventory depreciation risks, lock in production costs, and stabilize operating profits. Mining companies can also reduce market risks caused by future price uncertainty by locking in future prices; Traders can purchase iron ore while also hedging their sales in the futures market to avoid the risk of depreciation after the goods arrive at the port.

It is understood that Da Shang Suo's iron ore futures have completed the project approval and may be launched within the year. As early as the second half of 2012, Da Shang Institute collaborated with the Industry Department of the National Development and Reform Commission to carry out a study on the impact of iron ore futures on the development of China's steel industry. The conclusion affirmed the positive role of the futures market in industrial development. According to personnel from relevant ministries and commissions, in the context of the gradual sufficiency and diversification of iron ore supply at home and abroad, as well as the rapid development of futures, swaps, and spot markets, based on the analysis of the impact of iron ore futures trading on the steel industry, it is proposed to carry out iron ore futures trading in China late rather than early.