On March 26, Dalian Commodity Exchange (DCE) and the China Association of Metalscrap Utilization (CAMU) signed a strategic cooperation agreement on the listing of scrap steel futures, the industry standard publicity and the market cultivation. DCE CEO Wang Fenghai, and Li Shubin, Executive Vice President and Secretary General of the CAMU, were present and delivered a speech. DCE Vice President Zhu Lihong and Li Shubin signed the agreement on behalf of the two sides. Witnessing the signing ceremony were Wang Zhenwu, Honorary President of the CAMU, Shi Hongwei, Deputy Secretary General of the China Iron and Steel Association (CISA), and Wu Jingjing, Deputy Director of the CISA Marketing Department, Zhu Junhong, Chairman of Shanghai Ganglian E-commerce Holdings Co., Ltd., and representatives of industry enterprises like An Steel Group, Ma Steel Group and Shagang Group.
Wang Fenghai said in the speech that the iron and steel industry is the fundamental industry supporting the national economic development, and the risk management level of iron and steel enterprises will directly affect the industry development and even the stable operation of the macro economy. In recent years, DCE has successively listed metallurgical coke, coking coal and iron ore futures and ushered in overseas traders for iron ore with an aim of serving the risk management of the iron and steel industry. The open and transparent iron ore futures price has effectively reflected the real supply and demand of iron ore, improved the trade pricing mechanism, and gradually become the key basis for the pricing of iron ore spot goods, which has safeguarded the sound and stable operation of the iron and steel industry.
He said that DCE initiated the research on scrap steel futures at the beginning of the listing of iron ore futures in 2013, in a bid to construct a complete iron and steel production risk-avoiding chain. Over the past 6 years, DCE has made a lot of work in market survey and product research and development under the support of the CAMU and parties concerned; and it needs the support and participation of the CAMU, industry enterprises and all sectors of society in designing the futures contract rules. The CAMU, with wide-spreading members and abundant research resources, has played an important role in formulating industry plan, national standards and industry laws and regulations, as well as in industry technology innovation, information release and industry training. The singing of the strategic cooperation agreement showed that the two sides would enter into a long-term and in-depth comprehensive cooperation and jointly boost the listing of scrap steel futures, the industry standard publicity and the market cultivation, thus further serving the financial supply-side reform and the high-quality development of the iron and steel industry.
Li Shubin said in the speech that scrap steel is an important raw material for iron and steel production and also a renewable and reusable resource. Using scrap steel will benefit the green, sound and sustainable development of the iron and steel industry. China is the largest scrap manufacturer and consumer in the world, and the use level of scrap steel in iron and steel production has kept increasing. In 2018, the Chinese iron and steel industry consumed 188-million-ton scrap steel, accounting for 20% of the crude steel output in China. However, in comparison with the international market, the Chinese iron and steel industry still has huge potential in utilizing scrap steel, presenting a great prospect for the scrap steel market. Under such circumstance, the listing of scrap steel futures will boost the functioning of derivatives and serve the stable and sustainable development of the scrap steel market. Next, the CAMU and DCE will jointly conduct market survey, formulate industry standard and optimize the testing and inspection business, striving for the early listing of scrap steel futures and the breakthrough of no scrap steel risk management instrument in China.
Rapid development and great price fluctuation have been seen in the domestic scrap steel trading. The average fluctuation range of scrap steel spot price reached 43% over the past 3 years, and entity enterprises have had great demand on avoiding price risks and urgent appeal for the listing of scrap steel futures. A market insider said that the strategic cooperation between DCE and the CAMU would accelerate the progress of listing scrap steel futures, provide relevant entity enterprises with an effective risk-avoiding platform, guide them to make use of the futures market for enhancing their risk-hedging capacity, and further expand the futures market’s scope of serving the real economy.
