Investors breaking trading records on China's commodities exchanges are looking to metals and energy futures products such as stainless steel, tin and crude oil, as they hedge risks amid the global coronavirus outbreak or take speculative positions.
Activity has soared over the past month, pushing open interest and trading volumes in the futures markets to record and multi-year highs as the virus disrupts businesses and global supply chains, while consumer demand slumps.
"As the coronavirus epidemic spreads, the global economy faces greater uncertainty, causing more volatility in commodities prices," said a Shenzhen based trader.
Many business entities were looking to use futures markets for the first time to hedge risk, he said, particularly those involved in the non-ferrous metals supply chain.
Activity in steel and ferrous metals products has been more speculative in nature.
Open interest for stainless steel, tin, hot-rolled coiled steel, crude oil and bitumen all soared to historical tops on the Shanghai Futures Exchange in late March.
Near-record highs were also recorded for the exchange's copper, aluminium and fuel oil contracts.
"Speculative funds are also more active than ever, there is no shortage of money in the market. I think a relatively active trading atmosphere will continue for some time," the trader said.
For agricultural products like edible oils and meals, market participants worried that South American ports would close, limiting supplies of soybeans, and that key palm oil producer Malaysia would shut all its plantation estates, said Haitong Futures analyst Kong Lingqi.
On the Dalian Commodity Exchange, trading volumes for egg and soyoil futures rose to record highs in February and March respectively.
"Edible oils and meals are products that are more import dependent. As the overseas epidemic situation caused supply issues in exporting countries, domestic trading hype increased," said Kong.
Earlier movement bans and lockdown measures in China to contain the coronavirus had stalled transportation of feed supply and live animals, impacting poultry output and egg supplies, pushing up trading activity on egg futures on the Dalian exchange.
The virus outbreak also caused bearish views on crude oil demand, leading investors to short Shanghai crude oil futures and resulting in a surge of open interest levels to record highs.
Source:sxcoal
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