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China’s commodity exchanges move to cool iron ore, steel prices as supply squeeze fuels global rally

  • Efforts to temper gains in prices of iron ore, steel futures have so far failed to restrain a rally to new highs
  • China is the world’s biggest importer of iron ore and producer of steel, according to official data

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Iron ore being transported in Qingdao port, in Shandong province. China imported a record 1.17 billion tons of iron ore last year. Photo: AFP
Zhang Shidongin Shanghai
China has called for greater risk controls among commodity futures traders after overnight measures to cool rapid run-ups that sent contracts on iron ore to steel to record highs amid a global supply squeeze.
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The Dalian Commodity Exchange raised the margin requirement and widened the daily trading band for iron ore contracts starting Tuesday, without giving specific numbers, according to a statement posted its website late on Monday.

The Shanghai Futures Exchange also on the same day raised trading costs by reinstating fees for closing positions on contracts linked to steel rebar and hot-rolled coils at 0.01 per cent of transaction value, according to a statement on its website.

The move is sending a clear message that China’s market watchdog is paying close attention to gyrations in global commodity prices fanned by supply bottlenecks amid a wider reopening in major global economies. Apart from steel materials, copper also surged to a record in the US while a ransomware attack on US pipeline operator Colonial Pipeline spurred a rally in crude.

“There are lots of uncertain factors affecting market operations and commodity prices, particularly coking coal and iron ore, resulting in wild swings,” the Dalian exchange said. “Market players should participate rationally to guard against risks and ensure smooth functioning of the market.”

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