Analysis: China's launch of steel futures may change global pricing system

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Mar 2009

Shanghai Futures Exchange started trading of steels futures contracts on Friday, which is hailed as a sign that China's steel industry has taken an important step forward in the process of marketization in the words of Luo Bingsheng, executive vice chairman of China Iron & Steel Association (CISA). The unified steel futures prices formed on the exchange may become the pricing basis for China's steel plants, Luo holds.
Last year when steel prices plunged in and outside China, over 100,000 steel traders in China lagged behind the market and accumulated surprisingly high inventories, which not only cost them great losses but also further deteriorated the market situation.
Shang Fulin, chairman of China Securities Regulatory Commission, stated that the launch of steel futures would provide a risk-hedging tool for China's steel plants, traders and consumers; further, it will boost the healthy and orderly development of China's steel industry, and increase competitiveness of China's steel industry on the international market.
"Currently, prices of most futures contracts in China are greatly influenced by foreign futures bourses, thus they cannot reflect the real domestic market fundamentals," said Sun Lijian, deputy dean of the Economics School of Shanghai Fudan University.
"Although China is a major crude steel exporter in the world, the country has no pricing right on the market. The launch of steel futures will probably change this situation and increase China's influence on the global market," noted Xiao Cheng, general manager of GF Futures.

Source: Chinamining