Traders for China Steel Futures
By Daniel at 6 July, 2009, 9:24 pm
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Caijing reported that greater participation in steel contracts trading is a key to advancing China’s newest futures market, protecting Chinese steel companies from price fluctuations and breaking the price monopolies of international iron ore giants.
Mr Tang Liang China Chamber of Metallurgy Industry deputy chairman is promoting the fledgling futures market while shrugging off concerns about speculation. He said there’s no need to worry because large-scale and “legitimate” speculation actually reduces price manipulation risks.
Moreover, Mr Tang said growing pains are normal for a young futures platform such as the steel contracts market, which opened March 27 on the Shanghai Futures Exchange. But solutions to market startup problems come with the kind of maturity that would follow if more steel enterprises, financial institutions and other investors get involved in the trading system.
So far, the exchange has been approved to handle trading in contracts for rebar and steel wire. Regulators gave the market a green light in February.
Mr Tang whose organization operates under the All-China Federation of Industry and Commerce, said futures pricing supports the side of Chinese steel mills in their price negotiations with overseas iron ore suppliers.
Mr Tang said widely fluctuating steel price in 2008 contributed to big losses for Chinese steelmakers, before futures trading began. But existing futures markets for other products benefited Chinese companies that use nonferrous metals such as copper, aluminum and zinc, despite similar price fluctuations last year for those materials.
He said “The launch of steel futures will help enterprises avoid risks from changing prices. It will also support Chinese steel mills against the iron ore price monopoly of major international suppliers.”
Mr Tang emphasized that broad participation by steel producers, dealers, customers and investment institutions will be needed for China’s steel futures market to achieve its goal to function as an industry guide. But he said an efficient trading mechanism will attract participation by enterprises that demand an economic, convenient and credible trading system.
(Sourced from Caijing)
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