SteelOrbis Shanghai
According to officials in
China Securities Regulatory Commission, after discussions, Shanghai Futures Exchange (SHFE) and
China Securities Regulatory Commission decided to launch finished steel future transactions, and 6.5 mm
wire rod will be the first variety in the new field.
China Securities Regulatory Commission selected 6.5 mm
wire rod as the first product for the practice because it was sold through future contracts before. However, specialists noted that 6.5 mm
wire rod is not the best product to be sold in future markets, moreover, what they want to sell is
rebar rather than 6.5 mm
wire rod because of its larger market compared to
wire rod.
In the first half of 1994, there were future contracts for 6.5 mm
wire rod, with deals totaling to one million metric tons. But too much speculation due to imperfect laws and regulations led the State Council to suspend the future transaction of
wire rod in September 1995.
Since then, the steel future transaction has not been launched due to pressures from
China's iron and Steel Association (CISA). According to Mr. Qi Xiangdong, vice secretary-general of CISA, all members of the association are opposed to futures transaction for steel because the added value of steel products is low, and there's no successful case of steel future transaction. Nevertheless, some people think that the reason of CISA's opposition to the futures application is because they for fear that steel mills would lose the power of pricing.
The attitudes on steelmakers' side are contradictive. On one hand they think future transactions would be a tendency to lower the
trading cost and increase efficiency, on the other hand they are unwilling to see a decrease in steel mills' profits due to that.
Starting from 2003, various iron and steel electronic future businesses have emerged in
China. As far as Shanghai is concerned, there are altogether four such companies with daily
trading volume reaching one million metric tons.
In March 2004, Indian Futures Exchanges issued the first futures contract for steel products in the world. In October 2005,
Japan concluded the first future contract for
scrap. London Metal Exchange (LME), world's largest metal future exchange, started the steel future business on October 28, 2005, and it will also develop financial tools to control the risks in iron and steel future business.