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From July 24 to July 25, Dalian Commodity Exchange (DCE) and the Shanghai Ganglian E-Commerce Holdings Co. (SGE) jointly hold the “2013 (2nd) Summit on Supply and Demand of China’s Coal and Coke Industry Chain” in Qingdao, Shandong Province, during which displaying coal and coke futures’ market function and serving coal and coke enterprises’ operation have become the focus of attention of all parties.
At the summit, Xiao Chunquan, Director of the Monitoring and Coordination Bureau of the Ministry of Industry and Information Technology, made a keynote speech on the analysis of this year’s economic operation. He pointed out that though China’s industrial economic situation in the first half of this year fell on the whole, theoretically the fall remains within the rational space. The major difficulty of the economic development in this year lies in the co-existence of excess capacity and insufficient demand, the mingling of decrease of raw material cost such as the energy and the increase of labor cost, and the operating difficulties of small and medium-sized enterprises. Liu Zhenjiang, Chief of the Party Committee and Vice President of the China Iron and Steel Association (CISA), made a special report on the operating situation of the iron and steel industry in the first half of this year and its future tendency. He pointed out that the iron and steel industry must extend its industry chain and turn from the production-oriented into the service-oriented, so as to make itself a modern manufacturing industry and achieve transformation and upgrading. Particularly, as the coal and coke industry currently suffers the difficulties of over capacity and price decreasing, it is more necessary to reflect the importance of the mutual-dependence between the iron and steel industry and the coal and coke industry. Jiang Zhimin, Vice President of the China National Coal Association (CNCA), made an analysis in terms of the current operation of the coal economy, the influencing factors, and the coal economic tendency in the latter half of this year. He pointed out that since May of last year, deep contradictions accumulated during the development of China’s coal and coke industry, such as the decrease of sales volume, the increase of inventories, the sharp fall of prices, and the decrease of industrial efficiency, have become more salient. With the continuous release of coal production capacity, the rise of import volume, and the increase of water and electricity demand, the supply and demand of the market will still remain the state of loose total amount and structural surplus and the pressure to reduce production capacity and inventories remains strong. Ba Shusong, Deputy Director of the Institute of Finance of the Development Research Center of the State Council, made a keynote speech under the title of “Outlook of Situation and Policy of Current China’s Economy and Finance”. He believed that China’s economic growth is now transforming from the high-speed growth into the medium-speed one, which is mainly caused by the adjustment of economic structure. In the long term, the successful transformation will bring relatively higher economic speed.
Li Zhengqiang, General Manager of DCE, presented in his speech that since the launching of coke futures and coking coal futures by DCE in 2011 and in March, 2013, respectively, the two varieties have enjoyed stable operation, smooth delivery, and brisk trading. Besides, their function of serving the real economy has been given full play, the futures prices and spot prices have been closely linked with each other, spot enterprises in the industry chains of coal, coking, and steel generally pay attention to coke and coking coal futures, and many large industrial leading enterprises have already involved in the trading and delivery of these two varieties. He said that under the guiding principle that futures market should serve the development of real economy as put forward by the China Securities Regulatory Commission, DCE has, by innovating its products, perfected its operation system, enhanced the market efficiency, and tried its best to serve the coal, coking, and steel industries, as well as other real economy. In accordance with the national standard and the requirement of using main furnace and blast furnace, the delivery quality standard of coke and coking coal should be designed to enable coke futures price to reflect the spot prices of high-quality coke; while conducting delivery at the warehouse distributing center, factory warehouse can be set up at some large coking and coal enterprises to reduce delivery cost, which is also in line with the point-to-point practice of the spot market; with regard to the risk demand of large coal and steel enterprises, large spot enterprises are encouraged to apply for hedging and the delivery process management will be strengthened to ensure the safety and effectiveness of the delivery process and to lay a solid foundation for displaying market function. He also said that DCE will continuously stick to the general direction of serving the real economy and the industrial development and promoting the display of market function, do well in the development and maintenance of varieties, and by improving the contract and rules, provide better service to the coal, coke, and steel industries.
In addition, at the theme forum of the Summit, the leading industry guests, including Hebei Iron and Steel Group, Shandong Energy Group, Shanxi Coking Group, Rijin Chemical Group, Shanxi Coking Coal Group, Huaibei Mining Group, Qingdao Iron and Steel Group, and Shanxi Jiaotan Group, have carried out full discussion on the resource and demand of coking coal both at home and abroad and the opportunities and challenges faced by traditional enterprises in terms of the coke and coking coal futures. Most of them believed that with the gradual perfection of futures varieties of China’s coal, coking, and steel industrial chains, the industry and enterprises have fully realized the function and role of futures market and tried to avoid risk by using futures hedging. Last year, particularly, affected by the change of the macro-economic environment and the coke supply and demand pattern, coke prices have fell sharply and the development situation of the whole industry is relatively grim. Besides, some enterprises have encountered operational difficulties and gradually improved their understanding on macro-economic tendency and on such derivative risk management instruments as futures. And the coal, coke, and steel futures market has also received wide market attention. Some industrial enterprises believed that the futures market is not only providing enterprises with instruments to disperse and transfer risks, but also changing the pricing mechanism, settlement, and payment of bulk commodities, such as coal, iron ore, and steel. China’s coal, coke, and steel enterprises should base themselves on the international arena and become a real modernized company during the structural adjustment characterized by de-stocking, capacity-reducing, and de-leveraging. Besides, they should also, by centering on hedging, establish the risk management concept and change their operation modes.
It is learnt that it is the second time for DCE and SGE to hold the Summit on China’s Coal and Coke Industry which has attracted great attention from the coal, coking, steel, and other spot enterprises and exerted significant influence on the market. Some guests attending the Summit said that this Summit has provided enterprises in the coal, coke, and steel industries with abundant analysis on industry’s development and a good platform for communication and interaction. It has also played an important role in exchanging spot market information, communicating experience in participating futures trading, improving communication and cooperation between the industrial circle and the futures circle, grasping investing opportunity, enhancing enterprises’ market management level, and balancing the healthy development of the coke coal industry.
The current Summit has obtained support from the CNCA, the CISA, and the China Coking Industry Association and attracted the participation of nearly 600 persons from over 300 enterprises and such industry’s leading enterprises as Shanxi Coking Coal Group, Shenhua Group, Shanxi Jiaotan Group, Baosteel Group, Shougang Group, and Anshan Iron and Steel Group. The whole industrial circles have made positive response to the current Summit.
