DCE rallies on stimulus and ETF launch

 Chinese futures rallied on higher stimulus packages and better market sentiments.

The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for May 2020 delivery rose by 5.06% day-on-day to RMB 665 per tonne on Tuesday.

The steel rebar contract for May 2020 delivery on the Shanghai Futures Exchange also increased by 1.46% day-on-day to RMB 3,463 per tonne.


Hype over China’s first iron ore futures ETF

The rally in Chinese futures may be precursor for the launch of iron ore futures exchange traded fund (ETF) due to list on Hong Kong exchange on coming Friday, 27 Mar 2020.

So far, the yet-to-be launched ETF has raised around $11 million from institutional investors and clients at private banks.

The ETF will provide investors exposure to iron ore market in China, the world’s consumers that imported over 1 billion tonnes per year.

Moreover, the ETF will track the DCE iron ore futures index and use its closing price on March 20 as a benchmark.

More lockdowns to come on coronavirus threats

The rally may also reflect supply concerns as more countries were in lockdown to curb the spread of coronavirus.

South Africa has issued a nationwide lockdown for 21 days starting from Thursday, prompting market concerns over suspension in iron ore mining operations.

South Africa’s miner, Kumba stated that it will review detailed regulations and slated to issue a further statement in due course.

India has also issued a lockdown for 21 days, which may cause slower and disruptions to exports and trade flows among major Indian ports like Vizag, Gangavaram, Haldia/Kolkotta, Dhamra and Mormugao.

Meanwhile, Malaysia has extended its lockdown further to 14 Apr 2020 instead by the end of March. The extended period may have some adverse impact on Vale’s iron ore terminal at Teluk Rubiah in Malaysia.


US introduces coronavirus stimulus bill worth $2 trillion

Both US Senate leaders and the White House had agreed stimulus package worth $2 trillion after in loggerheads over which deals to adopt previously.

Under the package, there is a fund allocation at around $350 billion to aid small businesses to mitigate layoffs and support payroll.

There was also a bailout fund of $500 billion for corporate under stress and affected by coronavirus pandemic. So far, the equity market had reacted positively to the deal and it might have spillover effect to other markets.