China's Dalian Commodity Exchange (DCE) proposed to lower standard iron content requirements in ore delivered against its flagship futures to 61%, seeking to broaden supply sources to include lower grades amid a record-setting rally of the steelmaking ingredient.

Under proposed revisions to the contract's trading rules, which are open to public feedback until Saturday, the Dalian bourse plans to reduce iron content in ore from 62% while also amending quality requirements for silica and aluminum oxide, it said late on Tuesday.

The price spread between different types of iron ore has been changeable and fluctuated in recently years due to the pandemic, changes in supply and demand as well as monetary policies, the exchange said in a separate statement on its website.

The most-traded iron ore futures had surged over 50% so far this year and repeatedly struck all-time highs on the exchange amid strong demand in top consumer China and concerns over supply as Beijing's relations with key producer Australia continue to deteriorate. 

Meanwhile, the appetite for high quality ore has also increased fuelled by decent profits at Chinese mills. The price difference between high-grade 65% iron ore and 58% ore surged to a record $90.5 per tonne, while between benchmark 62% ore and low-grade the spread stood at $57.5. 

"Market experts believe that the proposal... is in line with the grade of mainstream products in the current market and actual demand of domestic mills," the DCE said in a separate statement on its website.

The exchange also plans to regularly change allowances for quality difference of substitute products, weakening premiums and discounts for deliverable iron ore brands to help stay in sync with the spot market amid big price fluctuations.

It had proposed making "dynamic" adjustments to premiums and discounts in December. 

"The adjustment (on premium and discounts) can help facilitate delivery of domestic iron ore...to serve the development of domestic products while helping to curb rapid rises," according to the statement.

The bourse currently allows 17 iron ore brands - including those from Australia, Brazil and China - to be delivered. Around 620 million tonnes of material consumed in China each year meets delivery conditions, it said.

The table below shows suggested changes to brand premiums and discounts of iron ore in yuan per tonne: Brand Name Premiums and discounts 1 Ansteel Mining Concentrates 0 2 HBIS Mining Concentrates 0 3 Benxi Steel Mining 0

Concentrates 4 Karara Standard Magnetite 0

Concentrate 5 AGGLOMERATE IRON ORE 0

CONCENTRATE 6 Carajas Iron Ore 15 7 Brazilian Blend Fines 15 8 PILBARA BLEND FINES 15 9 NEWMAN HIGH GRADE FINE ORE 0 10 MAC FINE ORE 0 11 JIMBLEBAR BLEND FINE ORE 0 12 ROY-F 0 13 IRON ORE FINES-IOC6 0 14 KUMBA STANDARD FINE ORE 0 15 FORTESCUE BLEND FINES 0 16 SUPER SPECIAL FINE 0 17 YANDI FINE ORE 0

($1 = 6.4260 Chinese yuan)

(Reporting by Min Zhang and Tom Daly; Editing by Lisa Shumaker and Jacqueline Wong) ((tom.daly@thomsonreuters.com; +86 10 5669 2119;))