On April 2, the first warehouse receipts of the blockboard futures on Dalian Commodity Exchange (DCE) for 1404 Contract were successfully generated at Benniugang Delivery Warehouse in Changzhou. The blockboards produced by Dalian Penghong Wood Industry Group, a client of Xinhu Futures, smoothly passed the delivery quality inspection and were registered as the first warehouse receipts for the blockboard futures market. The registration process of the blockboard warehouse receipts was fully tested.
Founded in 1997 and headquartered in Dalian, Dalian Penghong Wood Industry Group sets its processing factory at Fuyu, Jilin Province, with an annual production of more than 4 million pieces of artificial board products including blockboard and eco-board, accounting for nearly one third of the total productions in Northeast China. Zhu Qing, deputy general manager of the group, said in an interview that as a Dalian-based blockboard producer, the company has been paying special attention to the blockboard futures since the listing. The company actively participated in the first delivery of the blockboard futures mainly in order to actually experience and understand the whole process of the futures delivery and make effective preparations for the company to make full use of the futures market in conducting the hedging operations and ensuring sound business in the future.
The rules and methods for the full-indicator inspection of the blockboard futures were implemented completely in accordance with the national standards. In the course of the delivery, the quality inspection institutions conducted spot checks of the blockboards produced by Penghong Group strictly according to the plywood quality standards, with the inspection results showing that the boards to be delivered successfully passed the three requirements for appearance, core quality and physical and chemical properties and fully met the futures delivery quality standards, thus smoothly becoming the first registered warehouse receipts. This batch of warehouse receipts included a total of 11 contracts, an equivalent of 5,500 pieces of blockboards, with the alternatives of 18mm thickness as the delivery objects and a premium of RMB 15 / piece.
In response to the market view that the strict futures delivery quality standards are likely to result in the less supply available for the delivery of the blockboard futures, Zhu said that the standard quality delivery product of DCE’s blockboard futures is the 5-layer solid, glue stuck, double-sided sanding and indoor common-purpose blockboard with the indicators such as the appearance, warpage, materials, size deviation, board core quality and physical and mechanical properties meeting the requirements of the national standards for grade one products, the specification of 1220 mm * 2440 mm and the thickness of 15 mm and the formaldehyde emission level of E1. A premium of RMB 15 / piece is set for 18mm board, and a discount of RMB 30 / piece is set for the boards with the formaldehyde emission of E2 level. The standards have completely adopted the designing structure of the national standards and have been formulated strictly in accordance with the national standards, with the requirements not beyond the national standards. And Penghong Group has always produced the blockboards in strict accordance with the national standards, thus successfully passing the futures delivery quality standards inspection.
He said that there are indeed some enterprises failing to meet the national standards for the indicators such as the width-to-thickness ratio and formaldehyde emission, but it is not a mainstream phenomenon. In his knowledge, the blockboards produced by some large-sized producers in Northeast China can meet the national standards, and will pass the inspection if put into delivery on the futures market. Therefore, the spot market does not lack the products meeting the standards, but currently the producers are yet to improve their understanding of the futures market, resulting in a small number of producers participating in the futures.
According to the previous research of the market institutions, with the indicator of the formaldehyde emission limit standard as a reference, currently the annual apparent consumption of the traded objects and the production of the blockboards of the thickness of 15mm and 18mm are estimated at about 360 million pieces, accounting for 70% of the total consumption, and excluding the E2 level products as alternatives for delivery and according to 50% of products meeting the E1 level of formaldehyde emission, the spot goods available for delivery are estimated at about 126 million pieces.
In any industry in China, the national standards are mandatory quality standards of state authority, and it is natural to set the futures quality standards in strict accordance with the national standards. Zhu said that any producer paying attention to the raw materials and production processes can produce the boards meeting the national standards with no barriers for processes or technology. It is a matter of whether the producers have the intention or not and whether the market can reflect the quality in prices. Currently, on the European and American markets with extremely strict requirements for quality standards, the boards exported by China take the highest share, manifesting the situation.
In terms of delivery costs, Zhu said that there is a premium of RMB 15 / piece for the 18mm blockboards of Penghong Group in the delivery compared with the 15mm standard delivery products, and according to the company’s estimates, there will be profits. It can be said that currently the price of the front-month contract of the blockboard futures has basically achieved the return to the spot price.
Zhu said that the futures market can discover the prices, and the companies can use the futures prices to make judgment for the production and operation in advance so as to effectively manage the risks and operate soundly. Through the participation in the delivery, Penghong Group has gained a better understanding of the futures market, and will consider full participation in the futures hedging operations in the future, ensuring the operation through the modern financial market means. He also believed that if the mass production enterprises and real estate, renovation and other enterprises with the demands can actively participate in the futures market, then the fully competitive market and the guidance for and strict control of product quality with the power of the market will greatly promote the implementation of the standards on the market, thus providing new opportunities for the industrial transformation and upgrading.
On the last trading day before the Qingming Festival (April 4), Changzhou Benniugang Delivery Warehouse saw another 3 contracts of blockboard warehouse receipts generated. As of 4 April, the blockboard futures 1404 Contract had seen 14 contracts of warehouse receipts successfully registered.
