Shanghai Futures Exchange, home to the world's most liquid traded steel futures contract, is studying the launch of new contracts for stainless steel and scrap, an official said Friday.
It was also consulting the industry on adjusting the specifications of its existing carbon steel contracts, he added. Research into a stainless steel contract follows the exchange's launch of a nickel contract in March last year, Chen Ye, a professor in its gold and ferrous department, said at a conference in Shanghai.
"Nickel trading volumes have exceeded those in London half a year after being launched," he said, referring to the LME.
A stainless steel contract is being considered because while its prices are largely influenced by those of the key raw material, nickel, price movements of both are not in complete lockstep, Chen said.
SHFE has also entered into an agreement with China's scrap industry association to study the launch of a ferrous scrap contract, Chen said.
This will put it in competition with the LME, Borsa Istanbul and CME.
ADJUSTMENTS TO SPECIFICATIONS
SHFE, whose rebar futures contract is the world's most actively traded ferrous derivative, was in talks with the industry on changes to the specifications of its rebar, hot rolled coil and wire rod contracts, Chen said.
On rebar, the exchange is looking into ways to mitigate differences arising from transactions done on a theoretical and actual weight basis.
While SHFE's contract stipulated physical settlement on an actual basis, about half of China's mills delivered on a theoretical basis, Chen said.
Based on physical deliveries into SHFE's contracts in 2015, Chen said the difference from its actual-weight contracts was about 2.7-2.8%.
An official at China Railway Group said at the same conference that SHFE's delivery mechanism favored sellers more than buyers as it was based on actual weight.
Zhu Dingfa, director in the company's procurement department, said this deterred construction companies like the one he worked for from taking delivery from those contracts.
On HRC, Chen said the current 45-day period within which parties must deliver the product into approved warehouses for the issuance of a warrant may be "too short" according to market participants, and is being reviewed.
He added that the specifications of the wire rod contract, which has seen scant trading, may be amended.
