The growing possibility for the Shanghai Futures Exchange (SHFE) to launch stainless steel futures has received mixed market reactions, with producers’ applauding the development, while traders staying cautious on the move.
SHFE has been working on the stainless steel futures project for over two years, and just recently on September 26, the exchange, together with the Stainless Steel Council of China Special Steel Enterprises Association (CSSC), held a meeting with over 70 representatives from the related governing bodies and business sectors including producers, warehousing, downstream users and traders in Foshan, a key stainless trading hub in South China’s Guangdong province, according to the association.
At the meeting, the attendees discussed details relating to the stainless futures including the contract specifications, quality inspections and disputes, warehousing rules, brand registration and the agendas for promoting the futures and launch plan.
“It is necessary for China to strengthen and enhance the market share of specialty steel including stainless as the futures of carbon steel products including hot-rolled coil, rebar, and wire rod have matured and been well traded on the SHFE, a CSSC official, commented.
An official from Taiyuan Stainless Steel, a leading stainless producer headquartered in Taiyuan, North China’s Shanxi province, welcome the launch.
“We will definitely support this new contract when it is launched, as it will act as a really useful hedging tool, assisting us in risk management,” he said.
He, as an attendee at the Foshan meeting, disclosed that SHFE has been studying the 304 2B stainless cold-rolled coil as the futures product, and it plans to submit the detailed launch proposal to the China Securities Regulatory Commission, the governing body of stocks and derivatives markets in China as early as the end of 2018.
SHFE officials declined to comment on the following progress.
On the other hand, some stainless steel traders, however, appeared less ready to embrace the stainless futures.
“We are worried about the emergency of speculative trading in the market when the stainless futures contract is launched, which will bring chaos and undermine the influence of actual producers, users, and us,” a Foshan-based trader said.
Stainless trading, unlike carbon steel, is always with very thin margin despite the price movement seems much more impressive than carbon, he added.
Mysteel’s 304/2B 2mm stainless CRC price in Wuxi, the other domestic stainless trading hub in East China’s Jiangsu province, rose by Yuan 350/tonne ($51/t) or 0.2% on year to Yuan 15,950/t in-warehouse and including the 16% VAT as of October 9, but during the same time, the most trade nickel contact price on SHFE, a core raw material for the 300 grade stainless, settled at Yuan 104,600/tonne, increasing by Yuan 18,060/t or 21% year on year.
China is the world’s largest stainless consumer too, with its apparent stainless consumption being up 7.2% on year to 19.85 million tonnes last year, and its output up 4.7% on year to 25.77 million tonnes, accounting for merely 3% of the country’s total steel output.
Written by Thea Feng, fengyx@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com