The Shanghai Futures Exchange (SHFE) has approved three major steel producers serving China’s northern and eastern regions to be exchange-designated factory warehouses for rebar, according to an exchange announcement on August 18. Market sources welcomed the move saying the three mills would improve trading efficiency for these longs and could more readily accommodate clients’ needs.
The three mills are Angang Steel Co, based in Liaoning in Northeast China, Jingye Steel Co in Nandian City, Hebei in North China, and Shagang Group in Jiangsu’s Zhangjiagang in East China. The storage of each will be a maximum of 120,000 tonnes, according to the SHFE official release, though initially the capacity will be just 30,000 tonnes per mill. The three mills began offer these services starting August 19.
The storage charge that owners of the futures must pay the mills is set at Yuan 0.15/tonne ($0.02/t) per day, with that paid to mills when taking delivery being Yuan 15/t, Mysteel Global notes from the releases.
Currently, the SHFE operates five major assigned transaction warehouses with nine subsidiary storage sites, while the three new designated mill warehouses will host a total of six despatch points for physical delivery, the exchange said. In total, these can store some 1.49 million tonnes of bars. As of August 18, they were already holding 998,000 tonnes, SHFE said.
SHFE notes that the three domestic steelmakers are operating very well and boast good market reputations, which is in line with exchange requirements for mill warehouses. Moreover, each is ideally located in areas of large steel supply and demand.
“The three steelmakers sit in an arc in Northeast, North and East China respectively, covering the country’s major steel consuming and producing areas, which would make the (SHFE) prices more influential and serve enterprises in a wider field,” it stated, adding that this will serve to better meet the specific needs of users.
The buyers not only have the upper hand greater flexibility in choosing the brand, specification and diameter of products, but with the introduction of the mill warehouses, they also have more options regarding where to take physical delivery, Mysteel Global notes from the announcement.
Moreover, SHFE will stipulate the basic take-delivery charge for one of the six storage sites from the three mills. Based on this standard charge, the premiums or discounts for the other five are subject to negotiation between the owner of the bars and the storer, based on prevailing market rates. In this way, market charges would be synchronized across regions, the exchange notes. Also, as owners of the bars have more options in where to take delivery, they can chose the most convenient despatch point for their buyers and thus reduce delivery time and freight charges, Mysteel Global notes.
“The exchange’s move this time aims at making it more convenient for those firms that really rely on futures trading or hedging to take physical delivery, while it will also expand the SHFE’s influence in both the rebar physical and futures markets,” a Shanghai-based futures analyst said, adding though that Tuesday’s news is having no bearing in rebar prices.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
Photo: World Steel
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