Driven by an upward spiral in spot prices for zinc and an
ever-growing industrial need for the metal, the Shanghai Futures
Exchange (SFE) is set to launch a zinc futures contract to help
both consumers and producers hedge against risk.
Among the most active underlying commodities on the world
futures market, non-ferrous metals have equally important potential
as investment instruments.
Rising prices are forcing metal-consuming industries around the
world to minimize waste through restructuring the management and
production of the resource.
Zinc is expected to be the first new product launched this year
on the SFE, joining copper and aluminum as commodities with
domestically traded futures contracts.
Because China is a major producer of galvanized sheets and
lead-zinc batteries, it is also a major consumer of zinc, so
futures trading can offer an effective tool to reduce risks caused
by changing world prices.
Despite increasing world zinc production, Chinese consumers
still face supply challenges, with even stronger demand likely in
the years to come. Zinc prices are likely to continue to rise in
the near future and the possibility of hitting record highs this
year cannot be ruled out, experts said.
The average price for zinc during the first 11 months in 2006
rose 95.81 percent from a year earlier to 27,306 yuan per ton. Last
year zinc prices on the London Metal Exchange averaged US$3,172 per
ton, surging 129.6 percent from 2005.
"Proposed trading in zinc futures contracts will help establish
Shanghai's own system of setting a price for zinc, which would
better reflect the supply and demand in the domestic marketplace
and help free Chinese companies from prices dictated by
international traders," said Zhou Jie, a senior analyst with China
International Futures (Shanghai) Co Ltd.
In addition, the underlying instruments of zinc futures
contracts would set a unified standard for the purity of the metal,
which will help improve the market and ensure its healthy growth,
Zhou said.
As the world's most important manufacturing hub and raw
materials producer, Shanghai-centered Yangtze River Delta is under
strong pressure by its industries to diversify futures products and
expand their trading scale.
(China Daily January 19, 2007)