The Shanghai Futures Exchange (SHFE) has released a draft
contract on zinc futures for further discussion by commodity
traders before it submits the final version to the regulator.
The draft contract specifies the tick value, daily price swing
limits, contract value, and margin requirement for zinc
futures.
The SHFE invited more than 100 analysts and representatives from
all Shanghai-based commodity futures brokerages to a conference on
Saturday to explain the details of the draft zinc contract. It will
also organize conferences in Hangzhou and neighboring cities to
familiarize local traders with the terms of the draft contract.
Exchange officials expected the proposed contract to get
approval from the China Securities Regulatory Commission (CSRC) in
late spring. Trading in zinc futures is expected to begin shortly
after that. All infrastructure for the launch of trading in the new
commodity futures contract is now in place, an official told
China Daily.
Setting the tick value, or the minimum price movement
registered, at 5 yuan (64 cents) per ton, compared to 10 yuan
($1.28) for copper and aluminum, may encourage greater market
activity, analysts said. It will also better reflect supply and
demand changes in the market, they said.
The draft contract also specifies the daily rise and fall limit
at 4 percent, based on the closing price on the previous trading
day. The contract allows for a wider band of price fluctuations
compared with the daily limit of 3 percent for copper and
aluminum.
These provisions have the potential to make zinc "the most
actively traded metal on the SHFE in coming years", said Liu Chao,
an analyst with Xiangcai Qinian Futures Co.
Under the draft contract, the trading margin is set at 6 percent
of the contract value, compared to 5 percent for aluminum and 7
percent for copper. This margin level was chosen to reflect the
price of zinc, which falls between the copper and aluminium
prices.
The proposed contract also specifies the purity of underlying
zinc must meet the internationally accepted standard of 99.995
percent, or zero zinc.
"Trading of zinc futures is good news for all companies in the
zinc industry chain because we urgently need to hedge against
risks," said Wang Jianjun, general manager of Hunan Zhuye Torch
Metals Co Ltd. Based in Zhuzhou, Hunan province, the company
specializes in zinc plating.
"The proposed contract is subject to CRSC approval, and the
terms of the contract will see no big adjustments since it has
received wide recognition from traders," said Mei Yuntao, senior
manager of the SHFE's marketing department.
"Unlike copper and aluminum, which are dominated by a few major
domestic producers, there are no big players in zinc," he
added.
Rising consumption and production of zinc concentrates and
ingots has greatly increased China's influence on zinc prices in
global markets.
(China Daily February 5, 2007)