China to launch silicon futures as demand from solar sector surges

Workers check solar panels at a photovoltaic power station in Chongqing, China, July 27, 2018. REUTERS/Stringer ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. CHINA OUT./File Photo - RC2W6V9F6NC7

BEIJING, Dec 2 (Reuters) - China's securities regulator has approved the launch of industrial silicon futures and options contracts on the country's newest exchange, in a move that could help reduce price volatility in the metal used in most of the world's solar panels.

The contract, believed to be the world's first industrial silicon contract, will be listed on the Guangzhou Futures Exchange which was set up last year to focus on so-called new energy materials like lithium and rare earths.

The exchange has not yet said when trading will start.

China is the world's biggest producer of silicon, with annual capacity of about 5 million tonnes.

Last year, prices more than doubled on supply disruptions due to China's power shortages and as demand from solar power projects soared.

"There is lots of attention and expectations on the metal contract given its application in the hot solar panel industry and silicone sector," said Adam Sin, a researcher in the investment and trading department of CITIC Global Trade, a state-owned trading house.

Institutions are hiring researchers to specialise in the contract while large traders have stockpiled the metal ahead of the listing, he added.

Silicon is also used in electronics and by the automotive sector. The domestic market was worth 64.4 billion yuan ($9.17 billion)in 2021, according to the Guangzhou Futures Exchange.

The securities regulator said in a statement on Friday that the contract would help improve the pricing mechanism, enhance risk management companies and promote China's low-carbon development.

Prices of industrial silicon have hovered around 20,000 yuan ($2,847) per tonne this year, according to state-backed research house Antaike.

($1 = 7.0238 Chinese yuan renminbi)

Reporting by Siyi Liu and Dominique Patton Editing by Shri Navaratnam, David Goodman and Kim Coghill

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