China Commodity Bourses Raise Fees to Curb Speculation

Nov. 24 （Bloomberg） -- China, where the world’s four biggest agricultural contracts are traded, will raise costs to buy and sell farm-product and metals futures as part of a government effort to limit speculation and tame inflation.

The Dalian Commodity Exchange said today it will scrap a measure that lets some investors pay half the normal fees for contracts bought and sold on the same day and will cease all other discounts as of Jan. 1. The Zhengzhou Commodity Exchange and Shanghai Futures Exchange said they will extend fees now levied on some contracts to other products.

The government has pledged to use price controls and may raise interest rates a second time this year to slow inflation that rose last month to a two-year high and to curb food costs that jumped 10.1 percent in October. Chicago-based CME Group Inc. and other U.S. and European commodity exchanges also are charging more to trade some raw materials after prices jumped.

“Raising fees to be active on the exchange is a predictable move to try to calm down speculative investment,” said Gary Mead, an analyst at VM Group in London. “But high futures prices reflect both speculative investment and fundamental supply-demand factors.”

Soy Oil

Soy-meal futures on the Dalian exchange gained 8.1 percent this year and its counterpart on the Chicago Board of Trade climbed 12 percent. Soy oil traded in Dalian rose 19 percent and refined sugar in Zhengzhou has advanced 13 percent.

White, or refined, sugar listed in Zhengzhou was the world’s most-traded agricultural contract from January through June by volume, according to data from the Futures Industry Association. It was followed by the Shanghai rubber contract and the Dalian soy-meal and soy-oil contracts.

Volume for the Zhengzhou sugar contract more than tripled from a year earlier, and Shanghai rubber more than doubled, the FIA figures show.

The Chinese exchanges’ steps may have little effect on world commodities prices, partly because trading is closed to outside investors. The exchanges are open to domestic companies and foreign businesses that operate in China and buy and sell commodities as part of everyday activities.

‘Negative’ for Metals

Raising commodity trading fees is similar to increasing stamp duty for the stock market, and it “can be negative in the short term” for metals in Shanghai, said Pang Ying, an analyst at Shenzhen Rongtuo Trading Co.

CME Group, the world’s biggest futures market, this month raised the amount of money traders must keep on deposit for soybean futures by as much as 10 percent. ICE Futures U.S. increased margins for cotton after the fiber climbed to a record, and London-based LCH.Clearnet raised robusta coffee, cocoa and white-sugar charges.

The Chinese exchanges have used discounts for same-day trading as a way to stoke volume in the past, Dong Shuangwei, manager at Beijing Capital Futures Co., said by phone from Zhengzhou. The Zhengzhou exchange first halted fee discounts on cotton on Oct. 18. It later ended discounts for indica rice, white sugar, rapeseed oil and cotton, its website shows.

The Shanghai exchange last December temporarily cut the discount on trading of steel rebar and natural rubber, according to a statement dated Dec. 11 on its website. Its contracts include copper, aluminum, zinc, fuel oil and gold as well as rubber and steel.

Zhengzhou trades wheat, sugar, cotton, rapeseed oil, rice and pure terephthalic acid. Dalian contracts include soybeans, palm oil, soybean oil and corn.

--With assistance from Helen Sun in Shanghai and Elizabeth Campbell in New York. Editors: Dan Weeks, John Deane.