China Metallurgical News: The SHFE Assists the Transformation of Entity Enterprises

Updated on: July 5, 2016

Reported by Wu Yong, Guo Dalong, Journalists from China Metallurgical News

Mr. Teng Jiawei, Deputy General Manager of SHFE, said on the 2016 Steel Finance Derivatives International Conference that, at the critical period of supply-side reform of iron and steel industry, the SHFE will deepen service, develop variety, innovate product and system to assist the transformation of entity enterprises.

Organized by China Iron and Steel Industry Association, co-organized by SHFE, Dalian Commodity Exchange and Zhengzhou Commodity Exchange, the main theme of the conference is “Integration of Industry and Finance to Assist the Entity Transformation and Development”.

Teng Jiawei pointed out on the conference that, steel futures as the potential variety sequence, is playing the positive role on managing risk, discovering price, allocating resources, promoting of industrial transformation and upgrading since its release in 2009. The trading scale of steel futures taking rebar and hot rolling plate is increased after entering into market and the trading volume and sum have reached the highest level in the history, and the rebar futures has become one of the most active commodity futures varieties for three years.

Teng Jiawei showed that, as the scale of steel futures market is continuously extended, more and more steel production, consumption and circulation enterprises have carefully applied the futures market management price risk and acquired favorable effect, in recent years, a series of index including corporate client participation amount of steel futures, inventory and transaction percentage of corporate client, hedging amount and delivery settlement have showed better tendency and the effectiveness of hedging is obviously enhanced, the relevancy of futures price and relevant market at home and abroad is becoming closer. Thus it can be seen that, normative operation and experienced investor structure promoted the steel futures market to truly reflect the supply and demand changing tendency of entity industry, Teng Jiawei further emphasized that, futures price has become the main reference criteria of trade pricing of various spot goods in the market.

China is the big steel industry country in the world, large industrial scale, market mass and numerous hedge demand of entity enterprise is the basis for the development of Chinese steel futures and the key factor to form the global pricing.

Teng Jiawei believed that, steel industry as an important basic industry of national economy, is facing a series of severe challenge, and it is urgent to use market mechanism, economic method and law method to deal with excess capacity. In this key period that steel industry comprehensively carries out the national supply-side reform, SHFE will further give play to its advantage and strive to promote the breadth and depth to serve the entity enterprises and will:

1. Deepen industrial service, carry out various hedging publicity and training, aiming at the features of steel production, consumption and trade enterprises, reinforce the on-site service and business guidance to further enhance the ability and level of entity enterprises. 2. Refine the variety to adapt to the need of market development and industry customers, optimize contract element, perfect rules details, promote the operating efficiency and further give play to the role of futures market. 3. Promote product innovation and research on relevant derivatives and futures variety, including steel scrap and stainless steel and continuously enrich market hedge tools. 4. Explore the combination methods of futures and spot goods, to open up a new space of industrial service through system innovation to research and push out warehouse receipt transaction system, satisfy the demand of entity enterprises’ diversification, personalized risk management and resources allocation to attract more industrial investors to join in the futures market.