China Metallurgical News:Continue to Enhance the Capability to Serve the Real Economy through Expediting the New Products Innovation

Updated on:  Jan 16, 2018

Reported by Wu Yong

New changes have taken place in the futures market since the steel industry continued to do well in 2017 due to the driving of the supply-side structural reform. Then how did the steel futures market do in 2017? Recently, in an exclusive interview, a relevant head of Shanghai Futures Exchange (“SHFE”) talked to the reporter from China Metallurgical News about the operation of steel futures, new products R&D Plans and related opinions and suggestions.

How those futures, such as rebar, wire rod and hot rolled coils, had been running during 2017? What will the new changes or characteristics be showed according to their operational data？

SHFE: the operation of steel futures in 2017 has the following characteristics: firstly, the market size has stayed ahead of the game. Steel futures has attracted widespread attention and participation by the enterprises and market players ever since the listing, especially the rebar futures, which has become the No.1 futures product in domestic market for consecutive years. In 2017, the trading volume of rebar futures amassed 702 million lots (or 7.02 billion tons) (one-side counted, similarly hereinafter), a year-on-year decrease of 24.85%, and an annual turnover of RMB24.27 trillion yuan, a year-on-year increase of 11.4%. The hot rolled coils market also maintained a rapid growth in 2017, creating a trading volume of 103 million lots (or 1.03 billion tons), a year-on-year increase of 138.28%, and an annual turnover of RMB3.78 trillion yuan, a year-on-year increase of 215.16%. Thanks to the emerging of market size effect, the conditions for serving the steel enterprises through hedging has become relatively matured. Secondly, the delivery runs smoothly and orderly. In 2017, the delivery volume of rebar recorded 114,000 tons, a year-on-year decrease of 34.26%, and that of hot rolled coils, 182,700 tons, a year-on-year increase of 158.05%. Thirdly, the contributed degree of legal person clients has been improved. In 2017, the averaged daily open interests of rebar reached 2.0173 million lots, a year-on-year increase of 19.63%, and that of hot rolled coils, 0.3804 million lots, a year-on-year increase of 171.37%. In the meantime, the Exchange saw the open interest ratios of legal person up to about 35% and 53% for rebar and hot rolled coils, respectively, both being higher than those of 2016.

In 2017, what were the priorities on which SHFE put the focus in order to serve the steel industrial clients?

SHFE: In 2017, the Exchange had actively implemented a variety of industrial service and market promotion activities to serve the steel industrial clients, specifically including: firstly, in conjunction with the industry associations such as China Iron & Steel Association, China Association of Metalscrap Utilization and Stainless Steel Council of China Special Steel Enterprises Association, the Exchange hosted more than 10 events for industrial training, and pertinently strengthened the hedging training according to the characteristics of the production, consumption and trading enterprises of straight carbon steel, scrap steel and stainless steel in a bid to further enhance the capabilities for enterprises to utilize the futures instruments. Secondly, the Exchange jointly held more than 20 events for market training together with relevant consultation institutions so as to guide and encourage more industrial enterprises to actively utilize the futures market for risk management and attain stable operation and healthy development of themselves. Thirdly, the Exchange, working with Nanjing Steel, launched the pilot project of Steel Industry Training Base and carried out the first phase of Steel Industry Training Base to strengthen the communication between futures researchers and physical industry and upgrade the ability and level of futures community to serve the real economy.

In order to further improve the level and ability to serve the real economy, aimed at ferrous metal futures, what will be the priority areas for the Exchange to focus on in 2018?

SHFE: aimed at ferrous metal futures, the Exchange will focus on the following areas in 2018: firstly, we will continue to intensify the existing products. In order to adapt to the market development and the needs of industrial clients, we will optimize the existing contracts and their rules, including the optimization of wire rod futures and the position limitations on rebar and hot rolled coils, and the promotion of mill-based delivery for steel futures. Secondly, we will develop new products in ferrous metal futures. In coordination with the national supply-side structural reform, we will take the initiative to match the demands of the real economy, expediate the product innovation and broaden the areas to serve the real economy, including the promotion of the research and development of stainless steel futures and the continuous improvement of its contact rules. We will strengthen the cooperation with China Association of Metalscrap Utilization, coordinate with concerned parties to carry out the work, refine the scrap steel industrial standards and deepen the feasibility research project of scrap steel futures. We will, working with China Iron & Steel Association, move forward with the implementation of the cold-rolled sheet futures feasibility research project in an orderly manner.

What are your opinions or suggestions on seeking better development of China’s ferrous metal futures market?

SHFE: first of all, we will expediate the R & D and the listing of the new products of ferrous metal futures. We will continue to focus on the product innovation, further push forward the R & D of stainless steel, scrap steel and cold-rolled sheet futures, and speed up the research in steel futures spread contract, ferrous metal index futures and steel products futures and options in a bid to broaden the breadth and depth of serving the futures market and add to the dynamism of a sustainable developing market.

Secondly, we will exert all efforts to deepen the industry and enterprise training service. Working in close cooperation with relevant industrial associations, local governments and information institutions, we will further strengthen the industry training and investor education, and continuously push forward the construction of Industrial Training Base of SHFE so as to constantly upgrade the physical enterprises’ ability and level to utilize futures instruments rationally and encourage the improvement of the futures firms’ capabilities to serve the physical enterprises.

Last but not least, we will explore the globalization process of industrial metal futures market. We will seize the opportunity for further promotion of the Belt and Road initiative to explore the globalization of non-ferrous metals and steel futures, and gradually build up a platform that encourages broad participation of investors both home and abroad in a bid to form the non-ferrous metals and steel futures prices with global influence and enhance the capabilities to serve the open economies.