China likely to launch bitumen future contracts in 2013

17 December 2012 08:32  [Source: ICIS news]

SINGAPORE (ICIS)--China is likely to start bitumen futures trading at the Shanghai Futures Exchange (SHFE) in 2013, which will help traders hedge against risk of price increases, market sources said on Monday.

A SHFE official last week revealed a draft of the bitumen futures contract at the 6th Bitumen Trading Conference, which was held on 12-13 December at Sanya in Hainan province.

Major traders based in Zhejiang and Jiangsu said the SHFE had already solicited their opinions on the draft and the standards of delivery warehouse ahead of the conference.

Some traders said the exchange has already selected several warehouses in east China as delivery points.

According to the draft, the contracts will trade AH-70 A-Grade bitumen, with 10 tonnes as one lot. The maximum fluctuation of price within a single trading day will be 3% and the margin, or deposit amount, will be set at 5%.

The contract draft also specifies that the bitumen delivery warehouse can be existing bitumen tanks at domestic plants, besides the traditional warehouses approved by the SHFE.

Sinopec, PetroChina and China National Offshore Oil Corporation (CNOOC), which produce over 75% of China’s bitumen, have started some research on futures trading as well, industry sources said. 

Although industry sources widely expect the contract to be launched next year, sources from the SHFE said the timetable has not been finalised yet and final approval from the futures regulatory institution of the State Council was still awaited.

If the contracts finally debut at SHFE in 2013, China - with an annual consumption of over 20m tonnes – will be the first in the world to have futures trading for bitumen.

Domestic bitumen traders are expected to extensively use the futures market to hedge against price increases.

Traders usually sign contracts with project contractors at fixed prices for supplying bitumen to projects for half a year or one full year. This sometimes results in losses when bitumen prices rises above their contract prices during the supplying period.


By: Alfa Li
020-3762 0271



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