China will open up futures markets for 14 commodities, including lithium carbonate and nickel, to foreign investors, Bloomberg reported today, citing a statement by the China Securities Regulatory Commission.
The move comes a few days after reports emerged that Beijing plans to launch liquefied natural gas futures priced in yuan. The Shanghai Futures Exchange has sought for years to launch yuan-denominated futures of key commodities, including LNG and nickel, to seek a role for China in the global pricing of the major Chinese commodity imports.
According to Bloomberg, the opening up of lithium and nickel futures markets has the same goal: give China greater price-setting power in these key commodities. The two metals are already among the most actively traded commodities in China, the report noted. One Chinese analyst suggested that more commodities could be added to the list in the future.
There are already copper and crude oil futures on Chinese exchanges open to foreign traders. The copper contract was launched in 2020, and the crude oil contract began trading in 2018. However, as Bloomberg points out, neither has had much of an impact on trade flows in the world’s biggest exchanges, where the commodities are predominantly traded.
There is also a physical supply consideration in the decision to open up commodity markets to overseas traders. With LNG, for instance, the biggest global LNG markets are linked to physical hubs for the commodity, including the U.S. benchmark Henry Hub, the European benchmark for gas trading, the Dutch Title Transfer Facility, and the Japan-Korea Marker for the north Asian benchmark.
“China needs a benchmark that reflects its own demand and supply. JKM can’t do that as it caters mostly to Japan and Korea,” a Chinese state gas trader involved in the discussions about the yuan LNG contract, told Reuters earlier this month.
By Charles Kennedy for Oilprice.com
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