March 18, 2011 / 12:57 AM / 9 years ago

UPDATE 1-Shanghai exchange to start lead futures trading

* SHFE to officially start lead futures trading on March 24

* Contract period from Sept 2011-Mar 2012, deposit at 11 pct

* SHFE expected to launch coke futures trading in Apr-source (Adds details, background)

SHANGHAI, March 18 (Reuters) - The Shanghai Futures Exchange (SHFE) has received regulatory approval to officially start trading lead futures from March 24, bringing a new hedging instrument for smelters to manage price risks.

The contract period for the futures will range from September 2011 to March 2012, with the deposit for each contract set at 11 percent of its value, the SHFE said on its website.

The daily movement limit is set at 6 percent and each lot size is 25 tonnes.

A lead contract launch had been planned last year but was delayed after some government departments blamed strong futures prices as a factor driving inflation in China, analysts have said.

SHFE’s move to set the lot size at 25 tonnes — five times that of its existing copper, aluminium and zinc contracts — is seen as a move to allay regulators’ concerns, as a higher lot size would raise the price of each contract and keep off small investors from speculating.

The introduction of lead futures in China, the world’s largest producer and consumer of the metal, will be welcomed by domestic producers because it will give them an avenue to manage price fluctuations.

Lead prices CMPB3 on the London Metal Exchange (LME) have jumped 71 percent from early June last year to close at $2,651 a tonne on Thursday.

Launch of lead futures on SHFE would also boost liquidity on the London Metal Exchange and create opportunities for investment banks, as Chinese investors seek to take advantage of arbitrage trading.

Separately, the Dalian Commodity Exchange is also expected to launch the world’s first coke futures contract in mid-April, a source told Reuters on Thursday. [ID:nBJI002619]

Industry watchers have said the coke futures contract would likely see strong participation from Chinese steelmakers as it would allow mills to hedge a big chunk of their production cost.

The Shanghai bourse trades copper, aluminum, zinc, gold, natural rubber, fuel oil, and steel futures. It was the ninth-largest derivatives exchange by contracts traded in the first half of 2010, as ranked by the Futures Industry Association.

Reporting by Ruby Lian and Fayen Wong; Editing by Jonathan Hopfner and Ken Wills

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