Date: April 1, 2013
Source: Futures Daily

　　After launch at Dalian Commodity Exchange (DCE), the coking coal futures have been actively traded by spot enterprises. According to relevant statistics of DCE, nearly 200 spot enterprises participated in trading of coking coal futures on the first day. According to the trading volume in the past week, the number of daily participants of corporation investors has increased steadily. The open interest of corporations is 10% on March 29. The average daily volume of coking coal futures is 688,000 contracts, performing much better than other products such as coke.
　　It is learnt that among the participants trading on the listing day, manufacturing, trading and consumption enterprises in the coal-coke-steel industry chain have taken up the largest proportion, followed by enterprises from the energy industry and the metal industry. Such customer structure has remained for several days. The trading direction of these participants is in line with their identity as spot enterprises, reflecting their ideas of avoiding risks.
　　“At present, the number of enterprises that have opened an account in China’s futures market only takes up about 2.8% of the total number of investors with an account. However, nearly 200 enterprises have participated in trading on the listing day of coking coal futures. On March 29, the position-holding ratio of enterprises reaches about 10%, which is a rather good result for a newly-listed product, indicating the industry’s recognition for this product,” Chen Bo, person in charge of the steel sector of CITIC Securities Futures, believed that the active trading of coking coal futures and the active participation of enterprises are, on the one hand, caused by the severe fluctuation of domestic coking coal and coke prices in recent years, which has presented higher risks for enterprises’ production and operation and triggered the market’s strong demand for avoiding risks, and on the other hand, caused by some enterprises’ deeper understanding of futures market as they have avoided the price fluctuation risk and stabilized their operation by participating in the coking coal futures trading after DCE’s launch of coking coal futures.
　　It is learnt that in 2012, frequent fluctuation has been seen in domestic coking coal spot prices and some industries and enterprises have faced production and operation difficulties. In January 2012, the average price of coking coal across China is about RMB1,600 per ton, which has now dropped to RMB1,300 per ton, down by 18.8%. The decrease rate of Australia’s coking coal contract price in the fourth quarter of last year reached 25%. Along with the price decrease and weak domestic demand, China’s coking coal industry and enterprises have faced production and sales pressure. The inventories of coking coal in Jingtang Port, Tianjing Port and Rizhao Port have kept increasing, and some domestic traders have suffered severe loss. “The sharp decrease of market prices and the increasing difficulty of sales are the major reasons for some industries and enterprises’ active utilization of futures market,” said Chen Bo.
It is learnt that since last year, DCE has begun to carry out large-scale training activities on coking coal market and popularize futures concept to enterprises. This year, before coking coal’s listing, DCE has gathered coking coal futures analysts from 45 futures companies to conduct on-the-spot inspection on enterprises related to the coking coal industry chain in Shanxi Province and carry out in-depth exchange with industries and enterprises, thus enabling enterprises to have a clear understanding on the hedging methods and delivery cost of coking coal and laying a better foundation for them to pay attention to and participate in the market.
　　Ma Cheng, analyst of Galaxy Futures, said that the higher level of industry customers’ active participation in coking coal futures is partly due to the wide trial range of the delivery products. “As the listed main coking coal is the best type of coal for producing coke and is of great necessity for enterprises, if used for buy hedge as the final delivery, it can be used to produce coke suitable to one’s own blast furnace by coordinating with other types of coal. As a result, many steel mills have high enthusiasm in coking coal,” said Ma Cheng. Besides, the higher participation level is also due to the growing number of coking coal traders than coke traders, particularly in terms of import. To coking coal importers, they would suffer high risks as the coking coal prices fluctuate severely and the shipping date is usually over one month with one cargo of 60,000-70,000 tons. They hope there will be some instruments that can escort their imported goods, so they have showed great enthusiasm in participating in the futures business.