The Shanghai Futures Exchange (SHFE) inaugurated its first new
product of the year yesterday, with zinc futures trading getting
the nod. The move was welcomed by metal-consuming industries since
it may well lead to other non-ferrous metal being admitted to the
futures exchange to cater to China's manufacturing needs.
"It will help increase China's influence on zinc prices
worldwide and better industries' risk management capability caused
by fluctuating world prices," said Shang Fulin, chairman of the
China Securities Regulatory Commission (CSRC) at the inauguration
ceremony yesterday.
Metal prices for July deliveries started at 28,600 yuan
(US$3,697)?per ton yesterday, ending at 29,220 yuan
(US$3,777)?per ton after 83,930 tons were traded.
Although China is the world's biggest producer and consumer of
zinc, the metal's futures and options have so far been traded only
on the London Metals Exchange, where prices rose over 120 percent
last year.
Driven upward by spot prices for the metal and the unquenchable
industrial thirst for it, the SHFE has now launched zinc futures
contracts after long deliberations.
"The non-ferrous metal industry has long expected zinc futures
trading," said Wang Gongmin, vice chairman of the China Non-ferrous
Metals Industry Association.
"The absence of a Chinese zinc price control mechanism has
sheepishly tethered industry participants to the ebb and flow of
international markets, rendering them incapable of accurately
reflecting the supply and demand for the metal," he said.
"The new trading in zinc futures will cause ripple effects
influence in the non-ferrous and futures markets since domestic
enterprises now benefit from an effective platform upon which to
hedge against fluctuating price risks."
The development of a Chinese commodity futures market will be
acclaimed by hundreds of thousands of small manufacturers, since
most large companies and state-owned enterprises already recoup
their pricing risk-taking maneuvers in overseas commodities
markets.
Shanghai Vice Mayor Feng Guoqin yesterday said the launch was
significant since it will not only boost zinc trading in China but
also the overall global competitiveness of the Shanghai futures
market.
The introduction of zinc futures has come amidst a call from
regulators to widen investment options. Last year, 33.5 billion
yuan (US$4.3 billion)?of annual investment funds in the stock
market were used in transactions that totaled close to half of
China's economy in value.
The zinc futures trading will also have to contend with new
government rules issued earlier this month, which opens this
trading to financial institutions once again, allowing them to
raise funds and offer securities for futures trading.
(China Daily March 27, 2007)