SFE urges steel investors to act rationally

The exchange moves to limit intraday rebar positions and hike fees

The Shanghai Futures Exchange ( SFE) Friday urged investors to trade “rationally” and keep the market stable, as it moved to limit intraday rebar positions and raise transaction fees.

In a series of statements designed to calm volatile trading, one of China’s major commodity derivatives markets said it would limit intraday positions for non- member firms and clients on rebar futures contracts for delivery in October 2017 and January 2018 to 8,000 lots from August 15.

Hedging transactions will not be affected by the limits.

The exchange will also raise intraday transaction fees from August 15 on those same contracts to 0.05 percent of the total value from the previous 0.01 percent.

“Certainly, this will help cool down the very hot futures market with futures prices rallying for either fundamental or speculative reasons,” said Helen Lau, an analyst at Argonaut Securities in Hong Kong.

But she cautioned that the impact may not last.

“Going forward, if there’s still money- making opportunity in trading futures for speculators or for institutions, the market will come back to life again,” Lau said.

Sources told Reuters earlier Friday that the exchange had informed members it may raise margins on steel rebar futures contracts if turnover remains too high.

Shanghai’s most- active rebar contract closed down 2.7 percent at 3,862 yuan a ton ($ 579.40) last Friday. It had hit 4,016 yuan a day earlier, its highest since March 2013.

Turnover in the contract hit 11.29 million lots last Monday, its highest since May 2016, according to the exchange.

Friday’s trading volume was over 9.15 million lots, the most for a single day since May 25.

The Shanghai exchange is not the only entity to urge calmness in Chinese markets over the past week.

The China Iron and Steel Association said last Thursday it believed the spike in steel futures prices was due to speculation rather than fundamentals, after meeting with its members in Beijing.

Chinese exchanges, including Dalian, Shanghai and Zhengzhou, imposed a series of similar curbs in 2016 to stamp out speculative trading that bloated prices and trading volumes across commodities from steel to rubber.