February 26, 2019 / 11:13 AM / 3 months ago

UPDATE 1-China's Dalian exchange to allow foreign individuals to trade iron ore futures

* Individual foreign investors can trade from Wednesday

* Dalian iron ore futures first went international last year

* Trading volumes have fallen sharply since - data

* More foreign investors will help with price discovery - analyst (Adds comment, background)

BEIJING, Feb 26 (Reuters) - China’s Dalian Commodity Exchange said on Tuesday it would allow individual foreign investors to trade iron ore futures on the bourse starting from Wednesday, widening access to the market in the world’s biggest consumer of the steelmaking raw material.

The exchange, which made the announcement in a statement on its website, last year opened up its iron ore contract to overseas companies in a bid to boost its sway over pricing for one of its top commodity imports.

Unlike China’s crude oil futures traded on the Shanghai International Energy Exchange, the Dalian exchange had not previously allowed overseas individuals to open trading accounts for iron ore, said Tiger Shi, managing director of broker Bands Financial.

The total monthly trading volume in Dalian iron ore futures has halved from 60.08 million lots in May 2018, when the internationalised version of the contract made its debut, to 30.12 million lots in January this year.

“The market will be bigger, broader and, hopefully, will be deeper,” Helen Lau, a metals and mining analyst at Argonaut Securities in Hong Kong, said. “And then there will be more liquidity and the price will not be so volatile and ... more capable of tracking the market supply and demand.”

The most important issue is whether investors will be allowed to freely bring in and take out yuan, Lau added, referring to the Chinese currency Dalian’s iron ore futures are denominated in.

The most traded iron ore contract in Dalian, for May delivery, fell by 3.2 percent on Tuesday to its lowest in more than three weeks after news that exports from Brazil were averaging higher year-on-year despite last month’s mine disaster there. (Reporting by Tom Daly and Muyu Xu; additional reporting by Enrico dela Cruz in MANILA; Editing by Shreejay Sinha and David Evans)

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