China is locking in steps to shape the pricing of the vast quantities of industrial metals it produces and consumes, with moves to attract foreign firms to...
LONDON/SINGAPORE - China is locking in steps to shape the pricing of the vast quantities of industrial metals it produces and consumes, with moves to attract foreign firms to trade on Shanghai's futures exchange, which would eventually fragment global markets .
ShFE benchmarks would eliminate the need for Chinese firms to link their physical contracts to LME prices and create a need for foreigners to trade on ShFE to influence reference prices in their contracts, shifting market sway from the west to China. ShFE has told industry stakeholders it intends to expand soon into international metals storage, two other sources with direct knowledge said, bidding to rival the LME's global network of more than 450 registered warehouses that hold thousands of tons of aluminium, copper and other metals.
Once ShFE makes a firm decision to offer metal storage outside China, the process of registering warehouses would be a matter of weeks if not days, as facilities already exist at ports that see large flows of metals, warehousing sources said. "Any exchange that wants to achieve internationalisation would face challenges ... ShFE would face many challenges and various constraints if it aims to become a global pricing center," Luo Xufeng, chairman of Nanhua Futures told Reuters.
"The only way to increase volumes is get more international involvement in ShFE," a metals trader with direct knowledge of the matter said, adding that China's government was behind the project to internationalise ShFE's contracts.
Industrial Metals Shanghai Futures Exchange Global Markets China Foreign Investors London Metal Exchange International Metals Metals Industry Direct Knowledge
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