On May 26, Dalian Commodity Exchange (DCE) joined hands with China Petroleum and Chemical Industry Federation (CPCIF) and China National Light Industry Council (CNLIC) to host the “China Plastics Industry Conference (CPIC) 2016” in Shenzhen. DCE vice president Wang Fenghai said in his speech that under the New Normal involving in current transformation and upgrading of the economy and deepening the industrial restructuring at present, the supply-side structural reform has posed new requirements for the development of the plastics industry, the plastics enterprises have shown stronger demand for risk management than ever before, and the futures market will play a more significant and positive role in advancement of the supply-side structural reform and business operation.
In his speech, Wang firstly described the development and operation of the plastics futures on DCE. He said that since the first plastic futures product was listed on DCE in 2007, the Exchange has now formed plastics futures offering covered LLDPE, PP and PVC, laying a solid foundation for better serving the real economy. In terms of the market operation, four features have been highlighted: firstly, the market operates safe and steadily. Compared with the huge volatility of the spot market, the corresponding futures market have maintained safe and smooth, laying the foundation for giving play to the functions and serving the industry. Secondly, the market liquidity has been improved remarkably. In 2015 the three plastic futures products on DCE recorded a total trading volume of 230 million contracts (unilateral, the same below), with a turnover of RMB 9.2 trillion and an average daily open interest of 607,000 contracts, growing by 133%, 86% and 44% year-on-year respectively and accounting for 21%, 22% and 12% of DCE’s totals respectively. The plastics futures products have become the backbone of the futures market in Dalian. Thirdly, the structure of the investors have been constantly improved. In 2015 the number of the corporate clients participating in the trading of the plastics futures on DCE reached 5,249, up by 44% year on year. The trading volume of the corporate clients accounted for 32% of the total, covering the upstream, midstream and downstream clients on the entire plastics industry chain and a large number of investment organizations and forming a diversified investor structure. Fourthly, the market functions have been brought into relatively full play. The correlation of the futures and spot prices of the plastics products has been comparatively high. In 2015, the correlation of the futures and spot prices for LLDPE and PP reached 0.78 and 0.81 respectively. The spreads between the futures and spot prices have been relatively stable and reasonable. The major producing and trade enterprises in the plastics industry are gradually adopting the internationally mainstream modes such as basis pricing in risk management.
On the conference Wang also briefed the recent efforts in curbing the tendency of related futures products toward over-speculation and safeguarding the stability in the market. He said that this year the domestic spot prices of relevant commodities have fluctuated fiercely and the trading of commodity futures has been unusually active. Especially since early April, the ferrous futures products have seen their transactions hit new highs repeatedly and the volume to open interest ratios climb continuously, showing the tendency of over-speculation. In light of the situation, DCE has vigorously taken measures, conducted all-weather tracking of the dynamics in the spot and futures markets, intensified market monitoring and supervision, and timely made research, decisions and arrangements. DCE has resolutely reined in the over-speculation and maintained the market order by taking the risk control measures for the futures products with overheated trading such as increasing the minimum trading margin, expanding the price limits of the contracts and significantly adjusting up the intra-day trading fees; in addition, while focusing on suppressing the momentum of short-swing speculation on relevant products, DCE has adopted differentiated measures to effectively protect the interests of the clients of the entity industries without increasing their costs. He further said that next, DCE will continue to pay close attention to the market dynamics, strictly monitor the market operation, resolutely crack down on the behaviors violating laws and rugulations, and effectively safeguard the good market order featuring “openness, fairness and justness”. At the same time, DCE will further improve the risk control mechanism and strengthen the capacity for risk control.
He also stressed that in terms of serving the real economy, DCE has always attached great importance to market cultivation and development for the plastics industry. Through constant exploration and innovation, DCE has successively launched the systems such as the bonded delivery of the PP, the registered brands of PVC futures delivery and the switch of futures and spot warehouse receipts for PVC. On the basis of extensive research and survey, DCE has timely adjusted the delivery areas and the setting of premiums and discounts for the plastics futures products, further optimized the distribution of the delivery warehouses, continued to improved the market efficiency and reduced the enterprises’ costs in participation, so as to solidly implement the fundamental purpose of the futures market serving the real economy. With regard to the research and development of new products, he said that DCE is energetically advancing the development and listing of the ethylene glycol and other chemical futures products, so as to further expand the scope of serving the real economy.
It was the ninth session of the plastics industry conference jointly organized by DCE, CPCIF and CNLIC. The conference attracted the participation of the representatives of more than 300 enterprises and organizations such as related industry associations, spot enterprises, futures companies and investment organizations.