China Securities Journal: Tin Metallurgical Enterprise Futures Trading Workshop Held

Updated on: January 22, 2016

Reported by Guan Ping, Journalist from China Securities Journal

Shanghai Futures Exchange (SHFE) and ITRI hosted Market and Futures Trading Workshop attended by domestic tin metallurgical enterprises in Kunming on January 14.

Tin Futures, listed on SHFE in March 2015, has seen an overall steady running and a controllable market risk. SHFE relevant head noted that, by the end of 2015, tin futures contract volume totaled 1.032 million lots (bilateral calculation), which was approximately 1.032 million tons, and a transaction volume of CNY 0.11 trillion. Annual daily average transaction volume was 5,000 lots, daily average transaction volume saw CNY590 million, while daily average position was 4,000 lots. Entity enterprises gradually deepened in participation of hedging in the tin futures market. Futures market serving tin industry was seen initial functioning performance.

Experts noted that, viewing from the hedging perspective, it was not necessary to place too much emphasis on the difference in price between futures and spots. As long as spots and futures went in the same direction, hedging was sure to be achieved. When transactions were not active or hedging was difficult to operate, enterprises could take the natural hedging approach, lock the price of the purchase and sales contract to achieve profit by linear hedging.

With regards to issues such as pricing model of the futures and the spots market, experts stated that, factors that determined bulk commodity’s core values were multi-faceted, for example, industry demand and supply, currency, economic cycle and cost among others. The key point in the futures price game lied with producers’ judgment over the economic situation. Their judgment was formed by looking into the cost of mines, short-selling power of downstream purchasing agents, and investment power such as hedge funds. With the increasingly deepened participation of all market players, the discovery function of futures market price would be further embodied. Currently, the corresponding spots market of the relatively mature futures varieties such as copper and zinc was the result of incessant cultivation of all market players. This pricing model is characterized with futures contract + premiums and discounts.