Published On: Wed, Apr 7th, 2010

China Ranked No 1 In World Commodity Exchanges

The explosive growth of China has propelled the Shanghai Futures Exchange ahead of its rivals in New York and London to the top of the world rankings of commodity exchanges.

Judged purely on the number of commodity contracts traded in 2009, an astronomical rise in steel and copper trading allowed Shanghai to lead a trio of Chinese exchanges into the top six.

The move confirms a shift of economic power from West to East — and those positions, said commodity dealers in Hong Kong, give the Chinese exchanges a good deal more than bragging rights.

Traders around the world who used to look to London, New York, Chicago and Tokyo for a sense of the prevailing price of anything are becoming isolated if they do not check the day’s prices in Shanghai.

The Tokyo Commodity Exchange is losing its cachet especially quickly, having fallen out of the top ten for the first time.

It was not just that US and European exchanges suffered a slow post-crisis year, analysts at the Futures Industry Association, who compiled the data, said.

By contract numbers, trading on the Shanghai exchange in 2009 was 210 per cent higher year-on-year. Because of restrictions on the inflow of foreign money into China, almost all that rise was driven by domestic activity — both by industry and speculators.

The growth of the Chinese exchanges closely reflects the country’s status as the largest buyer of most key commodities. The Dalian Commodity Exchange in northern China has emerged as the global trading hub for edible oils, mostly soya and palm.

The Zhengzhou exchange does a roaring trade in plastic futures — an indicator of activity in the manufacturing industry and a contract that traded 161 per cent more vigorously in 2009 than in 2008.

The compilers of the commodity exchange data admit to some distortion in the way volumes are calculated. Many of the contracts traded in Shanghai are much smaller than those traded on Western exchanges.

Copper trading on the Shanghai exchange has risen spectacularly but the main contract is five times smaller than its London Metal Exchange equivalent.

However, that may be cold comfort. For some time, the London exchange has struggled to establish demand for a steel futures contract: efforts to do so have been poorly rewarded.

In March last year, Shanghai began offering a futures contract for a particular grade of steel used to reinforce concrete. Such was the demand that by December it had become the most actively traded metals contract in the world.

Source: The Australian

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