China Metal Futures Volumes Slump as Super Cycle Fades

Industrial metals futures trading in China slumped in the first half of this year amid a rout in global commodities as investment banks called an end to the super cycle of gains in raw materials prices.

Zinc volume dropped the most among base metals, falling 43 percent in the first six months from a year ago to 7.25 million lots on the Shanghai Futures Exchange, data from the China Futures Association showed. The total number of contracts on the SHFE and futures bourses in Dalian and Zhengzhou climbed with the addition of four new products including coking coal.

The LMEX Index of six base metals on the London Metal Exchange, the biggest bourse for metals trading, dropped 13 percent this year on concern that slowing growth in China, the largest user of metals, would damp demand. Raw materials lagged behind equities this year as banks from UBS AG to Deutsche Bank AG forecast the decline of the commodity super cycle, a longer-than-average period of rising prices.

“The overall performance of commodities wasn’t attractive enough to draw in funds, given the China slowdown theme,” said Wang Zhouyi, an analyst at Shanghai Cifco Futures Co. “That’s why a very small number of products had volume gains.”

In Shanghai, lead and aluminum volumes fell 14 percent and 0.8 percent, respectively, while the number of copper contracts was little changed. Fuel oil futures trading slumped 92 percent to 577 lots, according to the association data.

Non-genetically modified soybean trading dropped 48 percent to 5.21 million lots on the Dalian Commodity Exchange.

Combined Volume

The combined volume for all commodity futures in China doubled to 914.38 million lots from 452.99 million a year earlier, according to calculations by Bloomberg based on the group’s data. Contracts were added for glass, rapeseed, rapeseed meal, in addition to coking coal, to give industry more tools for hedging against price swings.

Steel reinforcement-bar futures in Shanghai, the world’s most-traded ferro contract on an exchange, climbed more than four-fold to 183.5 million lots, association data show. Steel wire and silver more than doubled and gold future trading climbed 14 percent.

“A recovery in the real estate market has led to a lot of interest in the rebar futures,” Shanghai Cifco’s Wang said. “For gold and silver, price volatility was attractive.”

New home prices in China jumped in June by the most since December, defying tighter government curbs on property.

The Dalian exchange, where soybean, soybean meal, soybean oil, and palm oil trade, was the busiest among the three bourses, accounting for 38 percent of volume, according to calculations by Bloomberg based on the association’s data. The Zhengzhou Commodity Exchange followed with a 32 percent share and the SHFE with 30 percent.

— With assistance by Helen Sun

Before it's here, it's on the Bloomberg Terminal.