DCE urges caution in iron ore, coke trades

China's Dalian commodity exchange (DCE) has asked trading firms to be "rational" while trading in iron ore and met coke futures in a bid to tame volatility amid sharp gains in prices over the past month.

The most active iron ore contract on the DCE has increased by 14pc this month to 728 yuan/t ($105.30/t), while the met coke contract is up by around 11pc at Yn2,264/t.

"The economic and financial situation at home and abroad has become more and more complex, and the uncertainties affecting market operations have increased," the DCE said. "The futures prices of iron ore, coke and other varieties have fluctuated greatly. All member units are required to strengthen investor education and risk prevention." It also reminded members of "rational participation and compliant transactions."

The DCE has yet to cut upper and lower price circuits or lift margin money requirements, which it has previously done during periods of volatility. The notice to members could be a signal of such a move.

Sharp gains in coke and iron ore prices are pressuring steel mills' profit margins, which are stable at present but almost half of the Yn1,000/t profits seen in 2018.

Prices of coke and iron ore have increased on the back of supply concerns. The Shanxi provincial government is planning to close met coke plants that could not meet emissions requirement by 1 October, creating concerns about tight supplies in this year's third quarter. Iron ore prices have been rising since February after a tailings dam accident at mining firm Vale's Feijao iron ore mine in Brazil. Forecasts of UK-Australian producers Rio Tinto and BHP's iron ore supplies remaining tight until July because of maintenance in Australia's Pilbara region has also supported iron ore markets.