China approves DCE to start PVC futures trading

16 April 2009 05:02  [Source: ICIS news]

SHANGHAI (ICIS news)--China Securities Regulatory Commission (CSRC) has approved polyvinyl chloride (PVC) futures trading on the Dalian Commodity Exchange (DCE) in a bid to help market players better manage price volatility, a DCE source said on Thursday.

“The government has approved that we can start PVC futures trading, and we are making preparations now,” the source told ICIS news in Mandarin. “We are striving to start trading by the middle of this year.”

PVC will become the second chemical product traded by the exchange after linear low density polyethylene (LLDPE). Other commodities traded on the exchange include corn, soybean, soybean oil, soybean meal and palm oil.

“I think futures will open another arbitrage window for us. The prices in futures will guide prices in the spot market so that we can hedge risk,” a trader in east China said.

DCE is currently seeking public opinions on PVC futures contracts and their regulations, according to an announcement posted on its website.

“Starting PVC futures trading could optimize the PVC pricing mechanism, guide the upstream and downstream companies of PVC to arrange production and business and ensure the balance of market supply and demand,” the statement said.

The proposed contract unit is five tonnes with a minimum price movement of CNY5/tonne ($0.73/tonne). The daily cap on price movement is proposed to be 4% of the previous day's close.

In 2008, China’s PVC output and apparent consumption stood at 8.82m tonnes and 9.25m tonnes respectively, becoming the largest PVC producing and consuming country in the world.

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By: Judith Wang
+65 6780 4359



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