The Shanghai Futures Exchange (SHFE) announced on 25 Jan’22 that it is considering the introduction of cold-rolled (CR) coil futures to meet market demand and active spot trading trend, as per a Steel Daily report.
SHFE intends to conduct futures trading for cold-rolled carbon steel with thickness of 1 mm and width of 1,250 mm. Also, the draft for introducing cold-rolled futures has already been completed.
The volume of one lot is 10 tonnes (t), the minimum price fluctuation is 1 yuan per tonne (about $0.16), the daily price fluctuation limit is $4 compared to the settlement price of the previous trading day, and the margin call is set at 5% of the contract amount.
If futures are actually traded, both the morning market (09:00-11:30) and the afternoon market (13:00-15:00) are traded, and it is known that the Indian regions are Shanghai, Le Chong and Tianjin.
SHFE mentioned that it is urgent to introduce China’s cold-rolled coil futures in consideration of excessively active spot trading in the spot market, sporadic demand movement, and increased volatility of cold-rolled coils.
The timing of the introduction of the Chinese cold-rolled coil futures may vary depending on the target by the end of the year, and the approval status of the government authorities.
Positive synergy with hot-rolled futures expected
SHFE launched a hot-rolled (HR) coil in Mar’14. As for hot-rolled coil futures, the existence of CR coil futures is unlikely to impair liquidity in the HR coil futures market, and, on the contrary, arbitrage trading may increase if the CR-HR futures spread is disclosed.
As of 2021, SHFE carbon steel rebar futures trading volume was reported at 6.6 billion tonnes, up 79.2% year-on-year, and carbon steel HR futures trading volume was 2.2 billion t, up 168% y-o-y respectively.
Note: This insight has been published in accordance with an article exchange agreement between SteelMint and SteelDaily.
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