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On November 4, 2022, Dalian Commodity Exchange (DCE) held the 2022 Work Meeting of Industrial Products Committee of the Board of Governors online to discuss latest development in Dalian futures market since early this year, including the operation of industrial products, the optimization of contracts and rules, and the R&D of new products. The meeting was chaired by Yang Qing, Chairman of the Industrial Products Committee and General Manager of Galaxy Futures. Wang Yufei, Vice President of DCE, attended the meeting and delivered a summary speech.
It is learned that DCE has been adhering to the general guideline of prioritizing stability while pursuing progress since early 2022. On the basis of building a strong line of defense against market risks, DCE places equal emphasis on the R&D of new products and the maintenance of existing ones. In the light of the features of industrial products and industry needs, DCE has deepened reform and innovation on all fronts, including product design, contract rules, market operation, industry services and risk control. It has also made great efforts to improve the operation quality and functioning of industrial futures products so as to offer futures solutions for further integrating industry and finance in the industrial field, helping enterprises to improve their hedging levels, and contributing to the safe and stable operation of the industrial and supply chains.
In terms of listed products, DCE has actively responded to the industry demands and the actual condition of the spot market. In addition to strict risk control, DCE has also adopted the method of “one strategy for one product” to constantly explore and improve the products and rules, promoting the alignment between futures and spot markets and bringing their functions into full play. In terms of ferrous metal, coke and coal futures, the new contract rules for iron ore futures have been implemented smoothly commencing with the May 2022 contract month and beyond. Under the new rules, the number of CTD brands and the volume of CTD available delivery have increased by 400% and 170% respectively, indicating that the new contract rules have been proved valid and rational by the market. The newly launched rolling delivery business has been recognized by the industry. This year, nearly 50% of the iron ore has been delivered through rolling delivery, which speeds up the circulation of warehouse receipts by greatly shortening the time for sellers to collect payments and buyers to receive goods. DCE also supports warehouses in conducting delivery exempted from inspection and factory warehouses in self-reporting the premiums and discounts, which helps reduce delivery cost and improve delivery efficiency. In terms of coke and coal products, as the coking coal trade has shifted from dependent on imports to domestic supply, DCE has correspondingly adjusted the standard delivery product from imported coal to Shanxi medium sulfur coal, and adjusted the benchmark delivery area to the main producing areas in Shanxi. As a result, the available delivery volume was increased by about 17 million tons, up 25%, which further improved the representativeness of futures prices correlating with the main producing areas and mainstream spot prices. In addition, six coking coal and coke factory warehouses were added. The total amount of factory warehouses capacity and the maximum storage warehouse receipts rose by 350,000 tonnes. By doing so, DCE supports leading enterprises such as Shanxi Coking Coal Group in participating in the joint development of the futures market by setting up factory warehouses.
Thanks to many targeted measures, nine industrial products futures of DCE have maintained stable operation and effectively performed their functions this year. As of the end of October, this year’s total trading volume of DCE industrial products futures is 860 million lots, with an average daily open interests of 424,500 lots, up 3% and 18% respectively compared with the same period last year. Corporate clients contributed to 75% of the average daily open interests and have become the “main force” in the market. In terms of delivery, 172,400 lots of industrial products futures were delivered in the first 10 months this year, up 36% year on year. The delivery volume of ethylene glycol and iron ore futures rose by 290% and 169% respectively. The large quantity of delivery have been carried out smoothly, which contributed to secure the supply and stabilize the price of commodities. The prices correlation between futures and spot and hedging efficiency of plastic chemicals, iron ore and other products exceeded 80%, providing effective instruments of hedging and pricing for enterprises.
To meet the actual needs of high-quality economic development and hedging risk of enterprises, DCE has accelerated its product innovation in key and difficult areas in national economic reform. Since early this year, DCE has made a major breakthrough in preparing for the listing of recycling raw materials of iron and steel futures and container capacity futures. Its R&D of ethanol, purified petroleum benzine, sulfur, glacial acetic acid, petroleum coke futures has been sped up. DCE has conducted feasibility studies on Northeast Asia crude oil futures, as well as the research on average-price-cash-settled contracts using the listed chemical futures as examples. By diversifying product supply with multiple levels, DCE has explored and developed a derivatives system for its high-quality development, and facilitated the deeper integration between enterprises and futures market.
During the meeting, members of the Committee acknowledged DCE for its efforts to optimize contract rules, develop new contracts and businesses, and support the development of enterprises and members. “The progress of DCE cannot be made without the strong support of the industry, members and other stakeholders. Going forward, we will work with all parties in the market to well implement the plan of building industrial products futures market, so as to contribute to the steady and healthy development of China’s industrial economy, and offer futures solutions to the development of China’s modern economic system,” concluded Wang Yufei.
