Shanghai rubber futures gain more international investors

Futures contracts listed on the Shanghai International Energy Exchange (INE) are gaining more popularity among domestic and foreign investors.

The TSR 20 rubber contract, one of the most popular, reached a record trading volume in July, indicating that it has gained international recognition.

Since 2020, Singaporean rubber manufacturer Halcyon Agri Natural Rubber has used the INE-listed TSR 20 rubber futures as a price reference when negotiating with buyers.

TSR 20 is a type of natural rubber imported mainly from Southeast Asia. TSR 20 futures trading was launched in Shanghai in 2019. Shanghai futures are denominated in renminbi, and investors can enjoy the net price.

Prior to the launch of the TSR 20 contract, Wang Xuefeng, Halcyon Agri Natural Rubber’s China office manager, used the Shanghai Natural Rubber Futures, launched in 1993, as a price reference for domestic trading. Meanwhile, Wang’s company followed Singapore-listed rubber futures for cross-border trading.

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But now, the Shanghai price has become the priority choice for local traders.

“Suppose local companies use Singapore futures contracts, which are denominated in US dollars. In that case, they will be affected by currency exchange rates, which will present them with some operational difficulties. Instead, the Shanghai contracts are closer to the actual prices here,” Wang said.

Wang added that when negotiating with tire manufacturers, he finds that more use the Shanghai price.

China is now the largest importer and consumer of TSR 20 rubber. Therefore, the launch of the corresponding futures contracts has attracted many investors.

Wang Haibin, Vice President of CMST Development, which provides one-stop service to traders from rubber storage to customs clearance, has followed the launch and development of the TSR 20 rubber futures. He said market participants they have diversified, injecting abundant liquidity into the rubber market.

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“Over the last three years, the size of the TSR 20 rubber futures market has continued to increase. The convenience between trading and physical delivery, and the good mutual interaction between physical and futures markets, make TSR20 rubber futures very popular domestically and globally,” Wang said.

In the first half of the year, the value of transactions on the Shanghai Rubber TSR 20 stood at around 650 billion yuan ($96 billion), up 45.88% year on year.

Shanghai Futures Exchange and Shanghai International Energy Exchange are providing more products to follow the development of the industry and meet buyer demand.

Hu Hui, deputy director of commodity futures development at the Shanghai Futures Exchange, said the exchange launched its first natural rubber futures in 1993, mainly catering to domestic participants. However, in recent years, foreign companies have generated a demand for this more international contract.

In the first half of the year, the value of transactions on the Shanghai Rubber TSR 20 stood at around 650 billion yuan ($96 billion).

“Since 2010, TSR 20 rubber futures have been in demand by industry associations and industrial participants, which can be a price risk management tool for global industrial participants,” Hu said.

So far, Shanghai has seen deliveries from 37 factories of 25 companies in four countries.

With the active participation of domestic and foreign entities, the trading volume of TSR 20 rubber on the Shanghai Futures Exchange reached an all-time high this month. Only on July 13, 119,877 operations were carried out.

Article republished by the Chinese state media CGTN within the framework of an agreement between both parties to share content. Link to original article:https://news.cgtn.com/news/2022-07-30/Shanghai-s-rubber-futures-gain-more-international-investors-1c5vjqIqfjW/index.html