China will launch the first LPG futures contract

China's Dalian commodity exchange (DCE) will launch an LPG futures contract on 30 March. An options contract will begin to trade on 31 March.

 

The Securities Regulatory Commission announced on 19 March that it will approve DCE's application to launch the contract. The launch of the LPG futures contract could provide domestic enterprises with a risk management tool and a transparent price mechanism. China is the world's largest LPG consumer.

 

Minimum trade volume will be 20 t/lot and the minimum price change will be 1 yuan/t. There will be 12 monthly contracts for trading from January to December. Trading will occur at 9-11.30am and 1.30-3pm Beijing time from Monday to Friday, or other times stipulated by the DCE. Daily gains and falls will be capped at 4pc of the settlement price from the last trading day. The minimum margin requirement will be 5pc of total contract value.

 

The contract will allow for physical delivery of LPG. The percentage of propane in standard deliverable LPG will be 20-60pc. Pure propane and butane also could be delivered without a premium over standard deliverable LPG.

 

Appointed delivery storage points remain unclear. The DCE on 10 March began to accept applications from companies across from provinces of Guangdong, Guangxi, Fujian, Jiangsu, Zhejiang, Shanghai, Hebei, Shandong, and Tianjin.

 

Guangdong, China's largest LPG consumption centre with demand of 5.2mn t/yr in 2018 for residential LPG, will be the main delivery point for contract settlements.

 

Source:Argus

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