China Inflation Concern May Delay Coke, Lead Futures Launch, Analysts Say

Bloomberg Jan 5---China may be delaying the start of lead and coke futures as regulators are concerned that the new products may add further pressure to rising inflation, said two analysts.

“The coke futures plan looks like being delayed,” Song Xuefen, an official at the press office of the Dalian Commodity Exchange, said by phone, without elaborating. Han Yun, an official at the Shanghai Futures Exchange’s press office said there was no information from the regulator on lead futures.

Inflation in China, the largest commodities consumer, gained to the fastest pace in 28 months in November, prompting the government to tighten monetary policy. Commodities trading volume in China last year was the highest in the world, the China Securities Journal reported Dec. 31, citing China Securities Regulatory Commission Chairman Shang Fulin.

“This is not the right time to introduce new futures products,” Che Hongyun, chief metals analyst at Galaxy Futures Co., said by phone from Beijing. “The keynote now is to prevent speculative money from flowing into the commodities markets, and hopefully tame prices.”

The central bank raised benchmark interest rates twice since October and commercial lenders’ required reserve ratio three times since November. The three commodity futures bourses have since November raised margin requirements, suspended preferential fee charges and tightened regulations on excessive speculative trading.

Plan Postponed

Dalian Commodity Exchange General Manager Liu Xingqiang said coke futures may start trading around Dec. 25, the China News Service reported on Dec. 3. Zhang Yisheng, vice chairman of the China Futures Association said in September the Shanghai Futures Exchange may be able to launch lead futures in December.

“I suspect the new futures will be delayed till March, or even to the second quarter,” Ren Gang, head of research department at Maike Futures Co., said by phone from Shanghai.

China is also considering raising the size of some futures contracts, as a bigger amount of capital required is expected to keep some speculators out of the market, the Shanghai Securities News reported on Dec. 30.

The Shanghai bourse trades copper, aluminum, zinc, gold, natural rubber, fuel oil, and steel futures, and was ranked the ninth-largest derivatives exchange in the world by contracts traded in the first half of 2010, according to the Futures Industry Association. The Dalian exchange, which trades soybean, soybean meal, soybean oil, corn, palm oil, polyethylene and polyvinyl chloride futures, was ranked 14th, the association data showed.

- Helen Sun. Editors: Richard Dobson, Jarrett Banks.