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The launch of coking coal contract accelerates
To heed the opinions and suggestions of all market participating parties, to further improve coking coal contract and relevant rules, to ensure the successful launch of coking coal contract and bring into play its role in the future, DCE issued a circular on February 21 and solicited public opinions on coking coal contract and related rules. This means the launch of coking coal contract that has been expected for a long time has accelerated.
According to the DCE circular, market opinions and suggestions will be solicited publicly on “Coking Coal Contract of Dalian Commodity Exchange”, “Amendments to the Trading Rules of Dalian Commodity Exchange”, “Amendments to the Delivery Rules of Dalian Commodity Exchange” and “Amendments to the Risk Management Measures of Dalian Commodity Exchange” before February 28.
Under DCE’s design of coking coal contract, the trading unit of coking coal contract is 60 tons per contract, the minimum changing price level is CNY 1 per ton, the trading limit of contract is 4% of the settlement of the previous trading day, the minimum margin is 5% of contract value, the trading months range from January to December, the last trading day and delivery day are the tenth trading day of the contract month and the third trading day after the last trading day respectively, and the settlement is in the way of physical delivery.
According to the exposure draft of the amendments to trading rules and delivery rules, the maximum volume of coking coal contract trading order made each time is 1,000 contracts, the delivery unit is 6,000 tons, and the coking coal positions held by personal customers and the open interests that are integer times the non-deliverable unit can not be delivered. Contracts should be delivered at one time, and after the last trading day of contracts, all holders of open positions should perform their contracts through delivery and the corresponding open positions under the same customer number should be viewed as covered automatically and the position covering price should be the delivery settling price.
The coking coal delivery standard system of DCE is based on the national standards including coal classification standard. “The Coking Coal Delivery Quality Standards of Dalian Commodity Exchange” of the detailed delivery rules stipulate the quality standard of delivered coking coal, its test methods, testing rules and transport requirements. Under “The Delivery Quality Standards”, coking coal delivered at DCE should be washed and selected by coal washing factories and meet the requirements of coke production, and there is no restriction on its origin. In terms of the specific indicators of standard delivery products, the indicators commonly used in spot production and transactions should be like the following: ash content should be greater than or equal to 10.0% while less than or equal to 11.5%, sulfur content be greater than or equal to 1.10% while less than or equal to 1.40%, the volatile matter reflecting the internal quality of coking coal be greater than or equal to 16.0% while less than or equal to 28.0%, the warehouse-in caking index greater than or equal to 75 and the warehouse-out caking index greater than 65, the maximum thickness of plastic layer less than or equal to 25.0mm, the post-reaction strength of coke generated in testing coke oven experiments done to comprehensively evaluate the coking property of coking coal greater than 50%, the vitrinite random reflectance standard deviation to identify the degree of coking coal blending less than or equal to 0.13, and moisture less than or equal to 8.0 % and greater than 8.0%——the corresponding weight deduction rate. “The Delivery Quality Standard” also determines the premium and discount standards for substitute quality difference.
The amendments to risk management measures show that where the total bilateral open interests in a contract month is less than or equal to 250,000 contracts, the margin of each coking coal contract is 5% of the contract value, and where it is greater than 250,000 contracts, the margin is 7%. In terms of limit to open positions, where the open interests on single side is greater than 80,000 contracts, the limit to the open contract positions of a futures company member should not be greater than 25% of its open interests; and the limit to the open coking coal contract positions of non-futures company members and clients in ordinary months is 5,000 contracts, and as of the tenth trading day in the month before the delivery month, the limit to the open interests of non-futures company members and clients is 1,500 contracts and the limit in delivery month is 500 contracts.
In order to provide better delivery service, the amendments to the management measures of standard warehouse receipts propose factory warehouses should deliver coking coal goods based on the reasonable requests of goods owners and negotiate freight and loss with them.
It is learned that DCE, taking into consideration the P2P trading mode in spot coking coal market, the direction and volume of actuals flows and the regional price characteristics, plans to make north China the delivery region of coking coal and set two types of delivery warehouses——warehouses and factory warehouses. It intends to make Jingtang Port, Tianjin Port, Qingdao Port, Rizhao Port and Lianyungang Port its basic delivery bases.
The relevant director of DCE said that coking coal has great caking property and is basic coal mixture used as raw material that is indispensable to coke production. China is the world’s largest coking coal producer and consumer, with an annual consumption of refined coking coal of nearly 200 million tons. Coking coal occupies an important position in industrial chain, as it links the three industries of coal, coke and steel. DCE, based on national standards, spot trading customs and production requirements, designs coking coal contract and its supporting delivery system, risk control system and other management systems and formulates corresponding rules and regulations, according to the principle of serving actuals and keeping safe, sound and complete variety sequence, after making thorough investigation and soliciting various opinions. DCE hopes to further improve contracts and rules by publicly asking for opinions of market participants, to ensure the contract will be launched successfully in the future and their functions of price discovery and hedging will be given full play to better serve spot enterprises and industrial development.
It is learned that DCE will hold a contract rule demonstration meeting after soliciting opinions and suggestions on coking coal contract and rule amendments, and submit these opinions and suggestions to DCE Council. The finally formed plan will be presented to CSRC for approval. At present, no launch timetable for coking coal contract is available.
Market participants believe that the great frequent fluctuations in coking coal prices expose the business of spot enterprises to great uncertainty, and steel enterprises, coking enterprises and coking coal producers urgently need to manage price risks and realize sound operation through derivatives markets. The launch of coking coal contract will further improve the variety system involving the industries of coal, coke, iron and steel, and metallurgy industry as well. Coking coal forms a comparatively closed variety hedging chain together with coke and steel, providing a more convenient risk hedging place with more complete functions. The current successful operation of coke and steel contracts shows coking coal will have active trading and its economic functions will be brought into play after its launch, given the great market demand and solid market foundation.
