Futures lead to pricing voice
By Richard Fu |
March 3, 2011, Thursday
|
Print Edition
Print Edition
THE upcoming launch of lead futures contracts in Shanghai may offer China a voice in the global pricing of the metal and enhance domestic companies' ability to hedge against price fluctuations.
For a long time, only a small number of Chinese companies can trade lead contracts on the London Metal Exchange while most miners, smelters and processors in the domestic industry have to trade on spot markets using LME prices as reference, and lacking a tool to hedge against price swings.
The situation hardly reflects China's role as the world's largest producer and consumer of lead, used in batteries, said Shang Fushan, vice chairman of the China Nonferrous Metals Industry Association.
As copper futures are already traded in China, the country is now a part of the global copper pricing system, said Cai Luoyi, an analyst at Shanghai CIFCO Futures.
The China Securities Regulatory Commission last month approved the launch of lead futures on the Shanghai Futures Exchange, which hasn't yet announced the date for trading to start.
Producers can sell their future production to lock in higher prices while consumers can buy future needs to reduce the risk of price fluctuations.
"I expect the domestic lead industry to benefit greatly with the launch of the new contracts," said Zeng Binglin, general manager of Zhuzhou Smelter Group Co, China's leading zinc and lead producer.
Industry officials had expected lead futures to be launched in Shanghai and coke contracts on the Dalian Commodity Exchange by the end of 2010.
But the plans were delayed because the CSRC was worried the new contracts may entice speculative money into the commodities markets and increase pressure on soaring inflation, industry sources said.
For a long time, only a small number of Chinese companies can trade lead contracts on the London Metal Exchange while most miners, smelters and processors in the domestic industry have to trade on spot markets using LME prices as reference, and lacking a tool to hedge against price swings.
The situation hardly reflects China's role as the world's largest producer and consumer of lead, used in batteries, said Shang Fushan, vice chairman of the China Nonferrous Metals Industry Association.
As copper futures are already traded in China, the country is now a part of the global copper pricing system, said Cai Luoyi, an analyst at Shanghai CIFCO Futures.
The China Securities Regulatory Commission last month approved the launch of lead futures on the Shanghai Futures Exchange, which hasn't yet announced the date for trading to start.
Producers can sell their future production to lock in higher prices while consumers can buy future needs to reduce the risk of price fluctuations.
"I expect the domestic lead industry to benefit greatly with the launch of the new contracts," said Zeng Binglin, general manager of Zhuzhou Smelter Group Co, China's leading zinc and lead producer.
Industry officials had expected lead futures to be launched in Shanghai and coke contracts on the Dalian Commodity Exchange by the end of 2010.
But the plans were delayed because the CSRC was worried the new contracts may entice speculative money into the commodities markets and increase pressure on soaring inflation, industry sources said.
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