UPDATE 2-China's LPG futures tank on debut, trading volumes robust

* Dalian LPG futures slide on debut as oil prices drop

* Trading volumes hit 85,000 lots

* LPG options to launch on Tuesday (Updates with closing prices, trader’s comment)

SHANGHAI, March 30 (Reuters) - China’s liquefied petroleum gas (LPG) futures fell on their debut on the Dalian Commodity Exchange on Monday, dropping as much as 10% after oil prices hit an 18-year low on fears lockdowns to curb the coronavirus will further hurt demand.

The front-month LPG futures contract, for November delivery, closed down 9% at 2,366 yuan ($333.29) per tonne on the first day of trade, with over 85,000 lots changing hands.

LPG, a refined oil product used as a fuel in vehicles and for cooking, is the third type of oil and gas derivative contract to be listed in China after crude oil futures on the Shanghai International Energy Exchange and fuel oil futures on the Shanghai Futures Exchange.

It is also the first new commodities derivative product China has rolled out in 2020.

“LPG prices fell as international crude oil prices have further declined,” said Ai Bo, LPG analyst at JLC Consulting. “However the contract’s transaction volume is very good.”

By comparison, Dalian’s flagship iron ore futures had around 610,000 contracts traded on Monday but LPG saw more trade than other steelmaking raw materials coking coal and coke, on 47,000 and 78,000 contracts, respectively.

“LPG is a product that is easy to market and its price fluctuations are more frequent,” Ai said, adding that trading interest in the product should be sustained.

LPG options, set to launch in Dalian on Tuesday “will definitely also be active”, she said.

A trader who observed the LPG futures launch said many people thought the opening price of 2,600 yuan a tonne had been pitched too high.

It was set on Thursday, he noted, when Brent crude closed down 3.8%. The international oil benchmark then tumbled another 5.4% on Friday and was last down a further 7.8% on Monday, hitting its lowest since November 2002.

Brent is languishing near $20 per barrel on growing fears the coronavirus pandemic is eroding demand and the Saudi Arabia-Russia price war is threatening to overload the market.

The launch of LPG options, meanwhile, will mark the first time futures and options for a single product will debut nearly simultaneously on a Chinese commodities exchange.

China’s commodity bourses have so far listed options contracts for products months or even years after the futures started trading.

The Dalian exchange earlier said that the listings would provide a timely new hedging tool for LPG companies, given the widespread market impact of the coronavirus outbreak. ($1 = 7.0989 Chinese yuan renminbi) (Reporting by Emily Chow in Shanghai and Tom Daly in Beijing; Editing by Himani Sarkar/Vinay Dwivedi and Emelia Sithole-Matarise)