Wednesday, April 23, 2014

HKEx to launch copper, aluminium, zinc mini-futures this year

HKEx to launch copper, aluminium, zinc mini-futures this year
* HKEx plans futures settled in renminbi
* Traders say could rival Shanghai exchange's
April 22 (Reuters) - Hong Kong Exchanges and Clearing Ltd <0388.HK> plans to launch copper, aluminium, zinc and coal futures contracts this year, it said on Tuesday, the exchange's first foray into the fiercely competitive, burgeoning Chinese commodities derivatives market.
The company said it will introduce mini futures for the three base metals based on settlement prices of the futures on the London Metal Exchange (LME) owned by HKEx and settled in cash with Chinese renminbi. They will trade in 5-tonne lots, rather than the 25 tonnes on LME futures.
The thermal coal contract will be U.S.-dollar denominated.
The move will aim to capture the growing appetite among investors in China for commodities trading and will offer currency convenience for its Asia clients. China is the world's largest industrial metals consumers and one of the largest producers, consumers and importers of thermal coal.
"The rationale behind our Asia commodities platform is to meet the needs of the industry here in Asia. This is just the beginning of our Asia commodities plan," HKEx Chief Executive Charles Li said.
If successful, the new products could also rival the Shanghai Futures Exchange, which sets the reference price for physical and futures metals trading in China. The copper, aluminium and zinc contracts are also 5-tonne lots and settled in renminbi.
While ShFE's metals turnover is still lower than the LME, the world's no. 1 metals market, trading the arbitrage between LME and ShFE copper contracts is one of the most active plays in the market.
"The contract could have significant implications for the LME/ShFE arbitrage," said Standard Bank base metals analyst Leon Westgate.
Li said he does not expect the contracts in Hong Kong to erode the ShFE's existing share of the market.
"I do not necessarily see it as competing (with the Shanghai contracts) because you have big users and have huge need to hedge," Li said in a news briefing.
The exchange hopes that the contracts would be a starting point for building mutual access to futures contracts in both Hong Kong and mainland China, Li said.
In the longer term, HKEx aims to licence some futures contracts from China's futures exchanges, such as iron ore contracts, to trade in Hong Kong, Li said.
The contracts will all be monthly cash-settled futures without physical delivery of the commodities. The LME also has LME mini copper, aluminium and zinc contracts in 5-tonne lots priced on the dollar.
The API 8 thermal coal futures in 200-tonne lots will be settled against the monthly average of all API 8 prices published in the Argus/McCloskey's coal rice index report in the expiring contract month. The contract will cover the spot month and the next 23 calendar months.
The index tracks the price for coal delivered to south China and is used for international physical and derivatives coal business.
To see the full HKEx statement, go to:

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