An opening ceremony for lead-futures trading on the Shanghai Futures Exchange. On Thursday, China's lead futures rose 3.19 percent on debut in Shanghai. [Photo / Provided to China Daily]

Shanghai trade will influence global spot prices and futures, says CNIA official

BEIJING - China's lead futures gained 3.19 percent on debut in Shanghai on strong interest from local companies to hedge risks.

The price of September-delivery lead, the most active contract, climbed to a high of 19,570 yuan ($2,982) a ton and settled at 18,935 yuan a ton at the close on the Shanghai Futures Exchange on Thursday. The exchange had set a reference price of 18,350 yuan the day before the debut.

Total volumes traded for the day were 73,440 lots of 25 tons each. Analysts expect the rise in lead futures will continue because of a likely surge in demand for the metal. Lead is the main raw material in the production of batteries, bullets and some radiation-protection products.

According to the China Nonferrous Metals Industry Association (CNIA), the country has been the world's largest consumer of lead for the past 10 consecutive years. Lead consumption was about 3.95 million tons last year, 44 percent of the global volume, CNIA said.

China's lead production in 2010 increased by 13.3 percent year-on-year to 4.199 million tons, making it the largest producer in the world, accounting for 46 percent of the global output, data from CNIA showed.

"The country's exports of automobile storage batteries, with lead as the main raw material, are expected to grow 16 percent every year by 2015, and this will boost demand for the metal in the long term," said Wang Juming, an analyst from China Fortune Futures Co Ltd.

Japan's earthquake and tsunami may also drive up the demand for lead-acid batteries as a short-term backup power, which is likely to push up the metal's price, Jia Zheng, head of the Industrial Department of Shanghai East Asia Futures Co Ltd, said on her micro blog.

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"The prices of lead futures traded in Shanghai will significantly influence the world's spot and futures prices," said Shang Fushan, vice-chairman of the China Nonferrous Metals Industry Association, who believed the new futures can boost the country's pricing power in the global commodity markets.

The Shanghai Futures Exchange has tight regulations to avoid excessive speculative trading for the new futures, which will ensure that lead producers and users can better hedge risks, Shang said. To limit potential speculative transactions, the bourse had set the contract size at 25 tons for each lot, five times as much as that of the other metal futures, such as copper, aluminum and zinc. The exchange has also set the upper and lower price movement limit at 6 percent for the contract.

In London, three-month delivery lead increased 1.1 percent to $2,747 a ton, the highest price since April 2008.

The China Securities Regulatory Commission gave approval for the Shanghai Futures Exchange to launch the new metal futures contracts on Feb 17. The launch was delayed from December, because regulators were concerned that the new metal futures may add pressure to soaring inflation.

The consumer price index in China rose by 4.9 percent in February from a year earlier, said the National Bureau of Statistics. The upward pressure from rising international commodity prices has become a dominant concern for the government which set an inflation target of 4 percent in 2011.

In February, the index measuring manufacturers' purchasing costs increased by 10.4 percent, because of surging raw material prices, and nonferrous metals prices rose 14.8 percent, according to the National Bureau of Statistics.