China's top coke producing province Shanxi will cooperate with Dalian Commodity Exchange (DCE) to promote the world's first coke futures, according to a strategic cooperation agreement it signed with the Shanxi Coking Industry Association (SCIA) on Jul 2.

Signing Ceremony  for Developing the World's First Coke Futures
 

The signing ceremony, previously planned on Jun 29, marks the start of concerted efforts in accelerating the debut of coke futures, after the DCE removed another candidate—Taiyuan Coal Exchange Center, from consideration following a further review.

According to the 21st Century Economic Herald,  officials with the Taiyuan Coal Exchange Center has approached the DCE for cooperation, saying the center also was responsible for coke trades. 

However, the SCIA's Shanxi Jiaolian Commerce Co., Ltd.,  is the best platform for the DCE to develop the coke futures in China, the report cited Chang Yijun, general manager of Shanxi Jiaolian, as said.

Chang Yijun, General Manager of Shanxi Jiaolian 

Actually, in early 2008, officials with the DCE visited Shanxi to study coke futures and reached preliminary intent of cooperation with the SCIA, said Zhang Gangfeng, secretary general of the SCIA.

Zhang Gangfeng, Secretary General of SCIA
 

As a professional industrial association, the SCIA has took the led in developing mid- and long-term coke contracts to help coke producers avoid risks in one of the most volatile market which has seen the coke price plummeted from a record high of 3000 yuan/t in August 2008 to present 1500 yuan/t.

The SCIA and a number of leading coke enterprises have established the Shanxi Jiaolian Commerce Co., Ltd. to develop mid and long-term coke contracts, with a full package of internationally accepted contract terms and standards, which are invaluable experience for coke futures, said Mr. Chang, who is also the chairman of Shanxi Fenwei Energy Consulting Co., Ltd., a professional energy consulting company that operates the information portal China Coal Resource website.

The two parties will jointly establish a research team to develop coke futures, according to the agreement signed in Taiyuan, the capital city of Shanxi. The SCIA will assist the DCE in futures market study, coke prices and relevant data, as well as in the formulation of futures contract terms and clauses.

In terms of coke spot market, the two parties will establish effective cooperation mechanism, and the DCE will provide essential technical supports, personnel training and information exchange with the SCIA for the existing spot coke market in Shanxi.

Meanwhile, the DCE will actively support Shanxi coke enterprises in the delivery of coke futures, provided that the SCIA offers assistance in the selection, construction and management of storehouses.

According to Guo Xiaoli, vice general manager of the DCE, the storehouses will be mainly in North China, which hosts the country's largest coke producing provinces including Shanxi, Hebei, Tianjin, Shandong, etc. At the same time, these provinces are also the largest coke consuming areas, using half of the total coke consumption in China.

A number of cities have been selected as ideal warehouses, such as Tianjin, Lianyungang, rizhao, Tangshan, Zibo, Taiyuan, etc.

Industrial insiders hailed the singing on coke futures. Zhang Yue, director of Shanxi Coke Group, expects the coke futures to commence operation in an early date. With the spot and futures markets, we would be able to shed off risks and lock the best price for both buyers and sellers, Zhang said.

Shanxi is one of the main coke production bases in China, with output and sales ranking first in China. It produced 82 million tonnes coke in 2008, taking up to 26% of the country's total coke output.

Moreover, the province has been the largest coke exporter in the world over the past years. The exports in 2008 stood at 6.7 million tonnes, accounting for some 57% of China's total.

Recently, the provincial government unveiled a plan on the adjustment and revitalization of its coke industry, aiming to control the production capacity to bolster coke price, and realize circular economy.

It is planned that Shanxi will control its total coke production capacity within 140 million tonnes by the end of 2011 and down to 120 million tonnes in 2015.