Abstract: By making use of the data from October 18, 2013, when China’s iron ore futures were listed, to December 23, 2016, this article studies the relationship between the futures prices and the spot prices in China’s iron ore markets and the dynamic changes of the price discovery efficiency in the iron ore futures market by employing the vector error correction model and the state-space model. The theoretical analysis shows that there is a long-term co-integration relationship between the future prices and spot prices in the iron ore markets, on which a state-space model in the form of error correction can be established. The empirical results show that, compared with the spot market, the futures market of iron ore reacts more promptly to new information, which holds a leading position in the price discovery function. Moreover, in the long term, the iron ore price adjustment mechanism mainly displays a tendency of adjustment from the spot price into futures price, and the iron ore futures market is playing a more and more important role in the process of price discovery. For these reasons, it is required to further develop and improve China’s iron ore futures market, so as to enhance its pricing efficiency.

Key words: iron ore futures market; price discovery; pricing efficiency