Wang Fenghai: Promoting the internationalization of iron ore futures and improving the pricing mechanism of the international market
The 2015 China Coal Coke Steel Industry Conference, jointly sponsored by China Coal Industry Association, China Iron and Steel Industry Association, China Coking Industry Association and Dalian Commodity Exchange, and exclusively organized by Shanghai Steel Union, was held in Hangzhou from August 19th to 21st. The conference was based on the theme of “Integration of Industry and Finance and Assistance for Industry Upgradeâ€. Sina Finance is the exclusive portal strategic partner to broadcast the entire conference.
The following is a lecture by Wang Fenghai, deputy general manager of Dalian Commodity Exchange.
Wang Fenghai: Dear friends, leaders, listened to one morning, the expert leaders introduced the macroeconomic situation in the morning, and the situation of the coal coke industry is very serious. The whole coal char and steel industry entered the era of meager profit, and the enterprises suffered more losses. Just mentioned the futures market. In addition to business operations and cost reduction, in the face of market price changes, enterprises should take more active use of market tools and manage price risks. This is also a means. Today, I mainly talk about promoting the internationalization of iron ore futures.
The iron ore variety itself has a strong international flavor. Here I will talk about three issues, one is the necessity to promote the internationalization of iron ore, the second is the feasibility of internationalization of iron ore futures, and the third is the process of internationalization. The key issues to be considered, and the fourth is the overall arrangement and advancement of internationalization.
First of all, the necessity of internationalization. The essence of internationalization is to establish and improve international capital and logistics channels, enrich the participants in the iron ore futures market trading as much as possible, and make futures prices more authoritative and serve related industries. In the domestic market, crude oil is the first type of international futures trading arranged by the China Securities Regulatory Commission of the State Council. The next one is likely to be iron ore. On October 18, 2013, OCT listed the iron ore futures. So far, it has operated very well, which also laid the foundation for internationalization. However, the current iron ore futures trading is mainly domestic enterprises, including related investors, traders and producers. Although the top 10 international traders have also participated, we feel that the participants are not rich enough. The resulting futures prices have insufficient radiation and influence on the international market.
Second, iron ore is currently in an oversupply state. In terms of iron ore pricing, we all know that the oversupply in the 1960s was mainly based on spot. In the 1960s, there was a long-term contract, and the price was unchanged for 20 years. After the 1980s, from long-term to short-term, quantitative is not priced, and prices are discussed every year. By 2003, Baosteel had joined in, and the model changed with market conditions. Prior to this, because this is a negotiated price, there is no precondition for the existence of the futures market. After 2010, it is mainly index pricing. Changes in the pricing model of iron ore have prompted the launch of iron ore futures. At present, the mainstream of pricing trade is mainly through the collection of indices for trade pricing. The collection has the scope of collection, and the price formed is far less convincing and representative than the futures market through public and bidding. The futures market happens to be like this. The participants are rich, and they can participate freely from the industrial chain. There are institutional investors who look for other people's mistakes in the process and look for their own profits. This is an open, transparent, and real price. From the perspective of market-oriented development, the importance of internationalization has become increasingly prominent.
In addition, from the perspective of commodities, this is the mainstream pricing model, such as grain, crude oil, and the pricing of precious metals, which are all priced through the futures market. The connotation of internationalization is to provide a platform for the futures market, allowing relevant international institutions, including large financial institutions and traders, to directly participate in the domestic market. There may be participants' qualifications, funds and free flow of goods. This is the main consideration for internationalization. After internationalization, I also talked about just providing fair and reasonable real trading prices for the market. If the real price is reflected in the use, the benefits of hedging and hedging will increase. In addition, stabilizing the relationship between the spot market and promoting the steady development of the industry requires industry friends to actively understand the market and develop steadily in an unfavorable market environment. We do this mainly to achieve this goal and find authoritative prices for the market. The authoritative price is not for everyone to see, but for everyone to use.
In addition, iron ore futures have the feasibility of internationalization. There are several main ones: First, it is in line with the overall requirements of China's capital market opening up, and in line with the national one-on-one strategy, to strengthen financial innovation, and external conditions have also changed. For example, in June 2015, the China Securities Regulatory Commission issued Order No. 116, and the interim measures for overseas traders and overseas brokerage institutions to engage in the management of future-specific futures transactions were issued. The specific varieties of crude oil were gradually opened up according to the unified deployment of the China Securities Regulatory Commission. In addition, the policy environment for the opening of China's capital market is basically in place. On July 24 this year, the People's Bank of China has a [2015] No. 19 announcement specifically mentioning the futures system arrangement for crude oil internationalization. At the end of July, the State Administration of Foreign Exchange issued a notice on the cross-border settlement of foreign exchange for the opening of certain varieties.
Third, iron ore itself is a large international product. Last year, China imported 933 million tons. According to incomplete statistics, there should be 1 billion tons of iron ore imports. There are more than 60 countries producing iron ore globally, and China accounts for more than 60%.
Fourth, the operation of futures varieties also has an international basis. At the end of June 2015, the cumulative turnover was 185 million contracts, and the average daily turnover was 442,600 contracts. From the perspective of operation, we are the market with the largest volume of transactions. The price influence.
In addition, the contract system for delivery in the futures market, we had a concern when the iron ore was listed at the time, the mainstream iron ore by brand, the standard may have problems, but after two years of inspection is very smooth, a total of 700,000 delivered Ton. From the delivery link, the contract design was more successful.
In addition, from the number of customers, the total number of customers participating in iron ore is 226,400, the number of corporate customers is 4,669, the legal person's trading volume is 34%, and the daily average position is also 30.8%. There are 568 industrial customers and 70 steel mills. Private steel enterprises are higher than state-owned steel enterprises. The private steel market is more active. In terms of state-owned, it is not enough for various reasons.
From the perspective of the price of the futures market, including the trend of spot prices, the correlation coefficient at the initial stage of listing is not high. From 2014, the correlation coefficient is basically 99%. The trading system arrangement, the iron ore futures closing of the Dachs is 3 pm every day. point. The Platts Index was released around 6 pm after the close. For the time being, our futures prices have had a substantial impact on the Platts Index.
According to incomplete statistics, 85% of domestic customers participate in iron ore futures trading. Although pricing has a traditional approach, the price of big business futures is considered as a very important factor. In addition, overseas customers also generally refer to Dalian prices to conduct overseas related derivatives transactions. Overall, although the iron ore futures market has achieved great results, there are still some imperfections compared with the international market, mainly Domestic state-owned steel companies are under-invested. Here we have made great efforts, including the industrial conferences like today. We went to the steel industry association to preach, let everyone know this tool effectively, and made a lot of efforts, and now it has changed. But still not enough. At present, the management of relevant departments is somewhat loose.
In addition, iron ore contracts, like other varieties, have contract discontinuities, and have some relationship with market structure, investor habits, and basic institutional arrangements. We are committed to doing this. The last point is that the degree of internationalization is not enough. International iron ore traders have also participated through domestic institutions, but we feel that it is still not enough. This is the most important idea of ​​internationalization.
The third part, the key consideration of iron ore internationalization, we have more than 200,000 investment customers, on the basis of the operation of the existing futures market, increase the composition of iron ore internationalization. This must take into account the connection of internationalization to the operation of existing markets. This is a key issue. At this point, we are very different from crude oil. Crude oil is a new platform, and the whole system is new. It may be in the process of internationalization. The risks are well separated by different platforms. For example, after internationalization, the existing rules, contracts, trading systems, liquidation, delivery and other basic systems must have an international trading habit, so this is our key consideration. The basic idea is to control the risks and ensure the market. Smooth operation, and realistically promote the internationalization of the iron ore market.
In terms of iron ore futures contracts, the contract remains unchanged, denominated in RMB, and crude oil is net, excluding taxes. Participation methods can be transferred to domestic futures companies through domestic futures companies or through overseas brokerage institutions; in terms of fund management, overseas participants can take offshore RMB, US dollars as margin, or take away US dollars. Domestic futures companies complete the settlement and sale of foreign exchange on the basis of actual profits and losses, and there are no policy obstacles in this regard. Clearing and risk, foreign investors are managed according to the average customer, so the settlement and risk control of the exchange and the member are not changed much.
The current progress, the policy of bonded delivery has already landed. In terms of business preparation, a special working group was set up in 2015. The general manager Feng Bo was the group leader, and the various departments were mobilized. Currently, 17 rules have been revised. In addition, the trading system is fully prepared, including the exchange side and the member end; Market presentations have also been carried out.
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