Singapore, Dalian 14 April 2011: Reuters

China's Dalian Commodity Exchange will start trading the world's first coke futures on April 15, providing a financial derivative tool for steelmakers and coke producers to hedge a key steelmaking ingredient.

Chinese speculators typically leap on new contracts, hungry for venues to put their money to work, but the large contract size may curb retail interest. "The new contract, just like lead futures, has a high lot size and this will definitely force individuals to stand out of trading as the exchange aims to cool speculation," said Jiang Zhiwei, an analyst with BOC International Futures.

The launch of lead on the Shanghai Future Exchange showed the success of such a policy. Volume quickly died down after an initial flurry as the exchange introduced a 25-tonne contract, some five times the size of other base metals traded on the exchange.

The trading margin will be provisionally set at 10 percent of the contract, which has a lot size of 100 tonnes. "As the world's first coke futures, this derivative will be able to lead the world market as a reference in the long run since China is the biggest coke producer, consumer and exporter," Jiang added.

Coke producers and traders said they will wait and see how the contract develops. "We would rather wait to know how it goes, especially how to account for the different qualities of coke for physical delivery," said a coke trader in Beijing.

TRADING PLACES

The base price of the September contract is set at 2,180 yuan per tonne, with prices for the other 7 forward contracts even higher, the exchange said on Thursday. The exchange will limit daily moves in the futures to 6 percent of the previous close.

China, which consumes more than 300 million tonnes of coke annually, is the world's biggest coke and steel producer. Coke makes up around 20 percent of the cost of steel making.

COPPER, GOLD AND SILVER

The Singapore Mercantile Exchange will also launch new contracts on Friday -- cash-settled gold, silver and copper futures. SMX, controlled by Financial Technologies (India) Ltd , has previously said it plans to launch a cash-settled iron ore futures contract, based on the iron ore index by data provider Metal Bulletin, which uses a 62 percent iron content benchmark.

Currently the exchange, which began trading on Aug. 31 2010, offers physically deliverable gold futures as well as euro-dollar and oil futures. The Dalian contract will trade on the Reuters Instrument Code The SMX copper contract will use, silver and gold will use.

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