China on Monday started the trading of yuan-denominated natural rubber futures, the technically specified rubber (TSR) 20 futures.
The TSR 20 futures is the country’s fourth commodities futures open to both home and overseas investors after crude oil futures, PTA futures and iron ore futures.
The listed futures on the Shanghai International Energy Exchange are contracts to be delivered from February to July of 2020. The benchmark prices of six contracts were set at 9,260 yuan (1,319 U.S. dollars) per tonne.
The trading margin for each contract was 7 percent of the contract value while sitting at 9 percent in the initial period. The daily trading band is 7 percent up or down from the settlement price of the previous trading day.
On Monday, the most active NR2002 contract was 560 yuan higher than its benchmark price to close at 9,820 yuan per tonne. The total trading volume for six listed contracts on the exchange was 96,702 lots, with a turnover of about 9.6 billion yuan.
Largely produced in Southeast Asian countries like Indonesia and Thailand, the natural rubber TSR 20 is a main raw material for tires.
China has become a major consumer of TSR 20 as the country sees a growing automotive industry, with total import volume of natural and synthetic rubber exceeding 3 million tonnes in the first half of 2019. The whole industry chain has been calling for risk management tools to hedge against price fluctuations.
Jiang Yan, chairman of the Shanghai Futures Exchange, said the launch of TSR 20 trading will promote risk management in related industries using the futures market and form a multi-layer system interconnecting domestic and overseas markets.
The previously-launched natural rubber futures in the Shanghai Futures Exchange mainly reflect the market supply and demand at home, while TSR 20 futures, a good complement, function in the global scope.
In recent years, China has opened more commodities futures to overseas investors and improved corresponding institutional systems and processes, said Fang Xinghai, vice chairman of the China Securities Regulatory Commission, at the launching ceremony.
China’s crude oil futures trading, launched in March 2018, has become the third-largest crude oil futures market globally, with the number of overseas investors surging 121.6 percent year on year.
Fang said TSR 20 is also an important product in bilateral trades between China and Belt and Road countries such as Thailand, Indonesia and Malaysia. China will further open up its commodities futures market to boost the influence of its commodities futures in global price setting.
Global TSR 20 production hit 8.74 million tonnes last year, accounting for 63 percent of the world’s natural rubber yield.
Li Jie with CCB Futures Co., Ltd. said that TSR 20 futures have been listed in commodity exchanges in Singapore and Japan. The launch will link the two with Shanghai through intermarket arbitrage.
“It will attract overseas investors and enhance the international influence of the Chinese commodity futures market,” Li said.