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Copper Cathodes Futures Contract Manual (2008)

Natural Properties and Application

Copper is one of the oldest metals mankind discovered and was in use by humans as early as more than 3000 years ago.

Copper is a metal with the symbol Cu, atomic weight 63.54, specific gravity 8.92, and melting point 1083oC. Pure copper has a light rosy or reddish color and shows a purple bronze color after copper oxide film forms on the surfaces. Copper has many valuable physical and chemical attributes.

●Both thermal and electrical conductivity are very high, second only to silver and much higher than all other metals. This attribute has made copper an important material in electronic and electrical industries.

●It has strong chemical stability and is erosion-resistant. It can be used in making various types of containers holding erosive medium, hence it’s widely used in energy, petrochemical and light industries.

●It’s highly tensile, fusible, malleable, and expandable. Pure copper can be drawn into very fine wires or laminated ito very thin copper foils. It can form into alloys with zinc, tin, lead, manganese, cobalt, nickel, aluminum, and iron etc. Such alloys are used in a variety of transmission parts and fixing parts in the mechanical metallurgical industry.

●It’s soft yet firm and colorful, which makes it a valuable building and decoration material.

The applications of copper’s major attribtes are distributed as below:

 

Attributes

Electrical conductivity

Errosion-resistence

Structural strength

Decorativeness

Application %

64%

23%

12%

1%

 

 

Market Distribution

International Market

Major Distribution of Copper Resources

Copper resources are abundant in the world. According to the 2005 U.S. Bureau of Mines statistics, the recoverable reserves of copper metal are 467 million tons in the world, while the reserve base is 937 million tons. Chile and the United States are the two countries with the most mineable copper reserves.

Geographically, there are five regions with the world’s most abundant copper:

(1) The western foot of the Andes within the territory of Peru and Chile in South America;

(2) The Los Angeles and Great Basin areas in West United States;

(3) Congo and Zambia in Africa;

(4) Republic of Kazakhstan;

(5) The eastern and central parts of Canada.
    In terms of distribution by countries, the world’s copper resources are mainly concentrated in Chile, the United States, China, Peru, Zambia, Commonwealth of Independent States (CIS), Indonesia, Poland, Mexico, Australia and Canada. Copper resources of these countries accounted for 87.2% of global copper resources, among which Chile is the world’s most copper resource-rich country, with copper reserves of about 29.98% of the world’s total reserves.

 

 

Production of Copper

Copper production was rapidly developed in the 1950s to the 1970s. The global refined copper production in 1950 was only 3.15 million tons, and was up to 7.7 million tons by 1974. But the two oil crises led to the shrinking copper consumption so that copper production has dropped significantly. In the 1990s copper production increased rapidly again. In 1999, Chile surpassed the U.S. as the world’s largest producer of refined copper. In 2006, China overtook Chile and leaped to the first in the world.

In 2007, global refined copper output reached 18.075 million tons, an increase of approximately 5.1%, while China’s refined copper output reached 3.491 million tons, an increase of 16.7 and continues to stay ahead.

(Note: 2007 data from CRU British Commodity Research Bureau)

 

Copper Consumption

Copper consumption is relatively concentrated in developed countries and regions. Western Europe is the world’s largest area in copper consumption. Since 2002 China has surpassed the United States to become the second largest market and also the largest country in copper consumption. After 2000, the growth rate of copper consumption in developing countries is much higher than that of developed countries. The proportion of copper consumption in Western Europe and the U.S. among global copper consumption is showing a decreasing trend, while Asian countries and regions (except Japan) with China as the representative has become a major growth point in copper consumption.   

In 2007 the world consumed about 18.146 million tons of refined copper, a growth of about 4.5% over 2006.
China is still the most important force in driving up copper consumption growth, with refined copper consumption in 2007 amounting to 4.621 million tons, an increase of up to 16.9%.
  (Note: 2007 data from CRU British Commodity Research Bureau)

 

The global flow of copper


Major exporting countries of copper concentrate: Chile, Peru, United States, Indonesia, Portugal, Canada, and Australia, etc.
Major importing countries of copper concentrate: China, Japan, Germany, Korea, and India, etc.
Major exporting countries of refined copper: Chile, Russia, Japan, Kazakhstan, Zambia, Peru, Australia, and Canada, etc.
Major importing countries of refined copper: China, United States, Japan, EU, South Korea, and China Taiwan, etc.

 

 

Refined Copper Output in the World’s Major Copper Producing Countries (1998-2007)

Unit: thousand tons

 

Output Year

 

Country

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

 

U.S.

2486.0

2122.6

1802.9

1802.0

1505.0

1321.0

1296.9

1210.6

1234.4

1264

Chile

2334.9

2661.3

2668.3

2882.0

2839.3

2901.9

2895.1

2776.5

2811.3

3064

Japan

1277.4

1341.5

1437.4

1425.7

1401.1

1430.4

1380.1

1386.9

1532.1

1597

China

1211.3

1174.0

1371.0

1423.0

1558.6

1772.2

2079.1

2583.4

2998.9

3491

Germany

695.8

695.6

709.5

693.8

695.8

584.9

660.0

642.0

658.3

650

Russia

655.9

736.6

824.0

871.0

890.4

818.4

885.0

1008.0

959.2

945

Canada

562.3

548.6

551.4

564.6

487.9

454.9

525.9

524.1

500.2

452

Zambia

 

 

 

 

 

 

 

 

490

553

Major Producing Countries

9223.6

9280.2

9364.5

9662.1

9431.0

9283.7

9722.1

10131.5

11184.4

12016

Subtotal %

65.22%

64.17%

63.19%

62.11%

61.22%

60.97%

61.51%

61.08%

64.24

66.48

China %

8.57%

8.12%

9.25%

9.15%

9.77%

11.64%

13.15%

15.57%

17.23

19.31

World Total

14141

14462

14819

15555

15406

15227

15805

16587.9

17408.0

18075

Note:

1.        Refined copper output includes electrolytic and pyrometallurgical refining of copper, production of blister copper, copper anodes and other primary raw materials, and also copper recycling from scrap metals and other similar raw materials, but excluding copper recovered by simple remelting of secondary raw materials.

2.        Source: WBMS (World Bureau of Metal Statistics). 2007 data from the CRU (UK Commodity Research Bureau).

  

Domestic Market

 Main Distribution of Copper Resources

In 2006, China achieved a major breakthrough in prospecting for copper deposits in a new round of land and resources survey, with an increase of 26.78 million tons of new copper resources. As of now, China’s total known reserves (copper) is 85.31 million tons, accounting for12.1% of the world reserve base in the same year, ranking the third after Chile and the United States.

Among China’s most well-known large-scale copper mines are Yulong Copper Mine and Qulong Copper Mine in Tibet, Dexing Copper Mine in Jiangxi, and Pulang Copper Mine and Yangla Copper Mine in Yunnan, both of which were newly discovered in recent years.   

 

(Note: China’s data from the January 24, 2007 report from the China Geological Survey Bureau)
Since 2000, China’s production of copper concentrate (calculated based on the amount of copper) has been hovering around 56-65 million tonnes, but there is a rapid growth in copper concentrate production in recent years, which reached 951,000 tons in 2007, a growth of 8.93% compared to 2006.
(Note: Data from Antaike)

 

 Copper Production

China is the world’s largest producer of refined copper, with refined copper production amounting to 3.491 million tons in 2007, accounting for 19.31% of world production. Domestic copper concentrate production cannot meet demand and import in large quantities is needed.

 

Copper Production of Major Domestic Producers (unit: million tons)

 

Rank

Producer

2001

2002

2003

2004

2005

2006

2007

Registered Trademark

1

Tongling Nonferrous Metals (Group) Co., Ltd. (incl. Jinlong & Zhangjiagang)

24.26

30.32

33.73

37.1

44.78

54.48

62.35

Tongguan,

Jintun,

Tongding

2

Jiangxi Copper Co., Ltd.

21.74

23.16

34.31

41.5

42.16

44.34

55.36

Guiye

3

Yunnan Copper Co., Ltd.

17.13

18.51

18.71

22.5

32.25

36.01

45.18

Tiefeng

4

Daye Non-Ferrous Metals Co., Ltd.

10.42

12.23

11.88

14.8

17.74

20.38

25.03

Dajiang

5

Jinchuan Non-Ferrous Metals Co., Ltd.

4.19

6.80

10.28

13.1

16.1

20.54

24.39

Jintuo

6

Dongying Fangyuan Non-Ferrous Metal Co., Ltd.

 

 

 

 

7.50

14.04

18.03

Lufang

7

Ningbo Jintian Copper (Group) Co., Ltd.

 

 

 

4.15

10.00

12.21

13.46

Jintian

8

Yantai Penghui Copper Industry Co., Ltd.

 

 

 

 

6.19

7.23

10.72

Sanjian

9

Shandong Jinsheng Non-ferrous Group Co., Ltd.

 

 

 

 

 

9.66

9.48

Yimeng

10

Baiyin Nonferrous Metals Company

6.40

6.02

6.20

6.3

7.75

7.58

7.13

Honglu


  
(Note: 2006 and 2007 Data from Antaike)

 

Copper Consumption

Since the 1990s, China’s copper consumption has entered a period of rapid development. The main driver of the rapid growth of copper consumption is the fast development of the national economy and large-scale infrastructure construction. The strategic shift of manufacturing from developed countries to China and other developing countries is also an important factor of China’s copper consumption growth.

Over the past 20 years, the proportion of China’s refined copper consumption in world consumption is constantly rising. In 2007, China consumed 4.621 million tons of refined copper, accounting for as high as 25.46% of total global copper consumption.
Domestic copper consumption structure is as follows: 53% in electricity, 6% in electronics, 9% in transportation, 2% in construction, 10% oin air-conditioning, 2% in refrigerator, and 18% in all others.
(Note: Data from CRU British Commodity Research Bureau)

 

   

Import and Export of Copper

 

China is the world’s largest copper consumer and producer, while copper resources are relative short. With the recent continued transfer of international manufacturing to China, the conflict between supply and demand of copper resources has become increasingly prominent. The self-sufficiency rate of domestic copper concentrate dropped from 80% in 1995 to about 23% in 2007, and large quantities of copper concentrate are imported annually.

From the perspective of market liquidity, a larger proportion of China’s imports of copper and copper composition is raw materials, mainly including refined copper, blister copper, scrap copper and copper concentrate. Copper processing trade is taking a dominant position; China is mainly importing from the Taiwan Province of China, Chile, South Korea and Japan; foreign-invested enterprises are the main importers, and these import enterprises are mainly concentrated in the Pearl River Delta and other regions.
China’s current copper export volume is relatively small, mainly in semi-processed products. Copper processing is the dominant trade. China’s copper is mainly exported to Hong Kong, ASEAN, Korea and Japan while foreign-invested enterprises are the major exporters, which are mainly in the Yangtze River Delta and Central regions.

 

 

  Exibit:       Table of China’s Refined Copper Supply and Demand in 1991-2007

                                               Unit: ten thousand tons

Year

Output

 Imports

Consumption

 Exports

1991

56.00

10.12

79.00

0.43

1992

65.92

26.10

99.00

0.98

1993

73.03

25.35

99.00

0.19

1994

73.61

7.23

91.00

1.07

1995

107.97

10.21

120.00

2.57

1996

111.91

14.97

125.00

3.98

1997

117.94

8.83

107.51

7.79

1998

 115.18

26.84

110.13

12.14

1999

101.13

54.77

147.00

10.3

2000

133.05

81.21

175.00

11.87

2001

142.51

95.40

208.3

5.40

2002

155.85

118.10

266.3

7.66

2003

177.22

135.73

306.51

6.44

2004

207.91

120.00

324.43

12.38

2005

258.34

122.20

366.53

14.01

2006

299.9

82.70

360.95

24.30

2007

344.10

149.37

480.94

12.59

Note: Data Source from related statistics from National Bureau of Statistics, the State General Administration of Customs, Antaike, WBMS (World Bureau of Metal Statistics)


Exhibit: Chart of China’s Refined Copper Supply and Demand in 1991-2007

Year

文本框: Unit: 10,000 tons

Chart of China’s Refined Copper Supply and Demand in 1991-2007

 

Factors Affecting Prices

Supply and Demand

 

According to principles of microeconomics, the price of a particular good declines when supply exceeds demand, and rises when the opposite is true. At the same time prices in turn affect supply and demand, that is, when prices are rising, the supply will increase while demand will decrease. Vice versa, there will be increased demand and reduced supply. Therefore, prices and supply and demand affect each other.

An important indicator of supply-demand relationship is inventory. Copper inventory is categoried as reported inventory and unreported inventory. Reported inventory, also known as “visible inventory”, refers to exchange inventories. The world’s more influential copper futures xxchanges are the London Metal Exchange (LME), the COMEX branch of New York Mercantile Exchange (NYMEX), and the Shanghai Futures Exchange (SHFE). All the three exchanges are publishing certified warehouse inventory regularly.

Unreported inventory, also known as “hidden inventory”, refers to the inventory held by worldwide manufacturers, traders and consumer business. Since these stocks are not regularly published, it is difficult to calculate, therefore it is generally measured by stock exchanges.

 

Macroeconomic situation


Copper is an important industrial raw material and its demand is closely related with the economic situation. When conomy grows, increased demand for copper drives up copper prices. During economic depression, the shrinking copper demand contributed to decline of copper prices.

In analyzing macroeconomic, there are two indicators that are very important. One is economic growth rate, or GDP growth rate, and the other is the industrial production growth rate.

 

Import and Export Policies   

 

Import and export policies, especially tariff policy, are an important means to balance domestic supply and demand by adjusting the cost of importing and exporting hence to control the import and export volume of a commodity. From January 1, 2008 on, China has implemented zero tariffs on imports of refined copper, and 5% tarrif on export of high purity refined copper. Export tax of 10% is levied on copper master alloy (the General Administration of Customs Announcement No. 79 of 2007). Both import and export taxes are reduced.

 

 

Expansion and Replacement of Copper Consumption

   
     Consumption is a direct factor affecting the price of copper, while the development of copper consumption industries is an important factor impacting consumption. For example, in the 1990s, copper pipe consumption in the construction industry increased tremendously in the developed countries, and the construction industry became the largest industry in copper consumption, thus contributing to the rise of the international copper prices in the mid-1990s. The U.S. housing starts also became one of the factors affecting copper prices. Since 2003, development of China’s real estate and power industries has greatly promoted the copper consumption growth, thus becoming one of the factors supporting copper prices. In the automotive industry, manufacturers are advocating aluminum to replace copper to reduce vehicle weight and thus copper consumption is reduced in the industry. Moreover, as technology advances, the scope of copper application continues to broaden. Copper has begun to play a role in medicine, biology, superconductivity, and environmental protection, etc. IBM has begun to substitute aluminum with copper in silicon chips, which marks the latest breakthrough of copper application in semiconductor technology. These changes will have an effect on the consumption of copper.

 

The Production Costs of Copper


     Production cost is the basis of measuring the level of commodity prices. Copper production costs include smelting costs and refining costs. Different mines adopt different methods to estimate copper production costs, the most common economic analysis is the use of cash flow breakeven costs,” in which the cost decreases with the increase of byproduct value. After the 1990s, the cost of production shows a downward trend.
   

Currently the average consolidated cash cost of pyrometallurgical copper smelting in western countries is approximately 70-75 cents per pound, and average cost of hydrometallurgical copper smelting is about 45 cents per pound. Hydrometallurgical production currently accounts for approximately 20% of total production. Domestic production costs are calculated somewhat differently from the other countries.

Issues in processing charges (TC/RC): changes in processing charges (TC/RC) reflect the changes in the game status between the copper mines and smelters in the copper industry. In recent years with the copper resources concentrating and the rapid expansion of smelting capacity, TC/RC is trending downward year by year. For example, the TC/RC signed by BHP with Jiangxi Copper and Tongling in 2008 is 47.2/4.72, an reduction of 21% as compared to the annual terms in 2007.

(Note: Data from CRU British Commodity Research Bureau)

 

Direction in Fund Trading

Although the fund industry has a long history, it has only been vigorously developinng after entering into the 1990s. Meanwhile, the extent of funds involved in commodity futures has also increased significantly. Judged from the evolution of the copper market in the recent decade, funds have played a role in fueling many of the big market rises.

Some funds are big and some small, therefore their operating practices also vary greatly. In general, the funds can be divided into two categories. One category is macro funds, such as hedge funds, with a large scale ranging from billions of dollars to as much as ten billions dollars, and is mainly put in strategic long-term investment. The other category is short-term funds, which is managed by CTA (Commodity Trading Advisors), with a smaller scale of $100 million or so, and relies on technical analysis for short-term operation, so it’s also called technical funds.

Judged from changes in the COMEX copper price and non-commercial positions (generally considered as the fund’s speculative positions), there is very strong correlation between copper price fluctuations and fund positions. And also because funds have a more profound understanding of macroeconomic fundamentals and are able to “foresee”, knowing the movements of funds also holds the key to grasping the market. The copper price trend in recent years especially since 2005 indicates that fund is the tremendous momentum behind the sharp and rapid surges in copper prices.

 

Price fluctuations of related products such as oil will also have an impact on the copper prices.

Crude oil and copper are important industrial raw materials internationally. Whether their demand is good or not best reflects how the economy is performing. So in the long term, there is relatively strong correlation between prices of oil and copper and the speed of economic growth. Because crude oil and copper are closely related with the macroeconomy, copper and oil prices demonstrate a positive correlation to a certain extent. But both just showed consistency in trend but short-term price fluctuations are not necessarily the same.

 

Exchange Rate Fluctuations

International copper transactions are generally denominated in U.S. dollars, while currently several major currencies in the world adopt a floating exchange rate system. With the official launch of the euro on January 1, 1999, the international foreign exchange market forms a balance of power among the 3 currencies: U.S. dollar, euro and yen. Since parity among these three major currencies frequently fluctuates, dollar-denominated international price of copper will be impacted by exchange rate, which is manifested in the slump of U.S. dollar against the yen in 1994-1995, the weak euro in 1999-2000 and a continuously weakening U.S. dollar in recent years.

 Based on past experience, changes in the yen and the euro exchange rates will affect the short-term fluctuations in copper prices, but will not change the general trend of the copper market. The impact of the dollar on the copper prices is increasingly intensified, and is widely regarded as one of the important drivers in the sharp rises of copper prices since 2003. However, the key factor in determining copper prices is still the fundamentals of copper supply and demand.

 


Exhibit: Copper Prices Trend (Mar 1993-Feb 2008)

Copper CU Shanghai Spot Price Physical

Copper CU LME 3M

Copper CU SHFE 3M

Price: Yuan/ton

Price: Dollar/ton

Time

Mar 1993-Feb 2008

Trend of closing copper price of SHFE in March, LME in March, and Shanghai copper spot price

 

 

 

 

 

 

 

 

 

 

 


SHFE Copper Cathodes Contract Specifications and Relevant Provisions

Copper Cathodes Contract

Contract Text

 

Product

Copper Cathodes

Contract Size

5 tons/lot

Price Quotation

(RMB)Yuan/ton

Minimum Price Fluctuation

10 Yuan/ton

Daily Price limit

Within 3% up or down of the settlement price of the previous trading day

Contract Series

Monthly contract of the recent 12 months

Trading Hours

9:00am-11:30am, 1:30pm-3:00pm (Beijing Time)

Last Trading Day

The 15th day of the spot month (If it is a public holiday, the Last Trading Day shall be the 1st business day after the holiday)

Delivery Period

the 16th to 20th of the spot month (extended to the next business day if the period falls on a public holiday)

Grade and Quality Specifications

1) Standard Product: standard copper cathode as prescribed in the National Standard of GB GB/T467-1997 for standard copper cathodes, with fineness of the main ingredient copper plus silver no less than 99.95%.

2) Substitute Product: 1. High Purity copper cathode, as prescribed in the National Standard of GB GB/T467-1997.
       2. LME registered copper cathode as prescribed in BSEN 1978:1998 standard (cathode level code: Cu-CATH-1).

Delivery Venue

Certified Delivery Warehouse of the SHFE

Minimum Trade Margin

5% of contract value

Transaction Fees

no more than 0.02% of contract amount (including risk reserve)

Settlement Type

Physical Delivery

Contract Symbol

CU

 

Note:

  1. From March 1st, 2005 onwards, daily price limit for copper futures contracts is temporarily adjusted to 4%;
  2. From January 1st, 2008 onwards, trading margin for copper futures contracts is temporarily adjusted to 7% of the contract value.

 

 

 

 

 


Contract Appendix

Appendix I: registered trademarks, packaging standards and premiums Standard for SHFE copper cathode

 

 

 

Manufacturing Company

Date of Registration

Trademark

Deliverable Grade

Dimensionmm

Weight per Bundle (kg)

Bundles per lot

1

Shanghai Xin Ye Copper Co., Ltd.

20010727

Shangye

Standard

900*740*10-12

2100

12

2

Jiangxi Copper Co., Ltd.

19930301

Guiye

Premium

1020*1010*16

2500

10

3

Tongling Nonferrous Metals Group Holding Co., Ltd.

19930301

Tongguan

Premium

1000*740*14

2500

10

4

Yunnan Copper Co., Ltd.

19930301

Tiefeng

Premium

890*850*8

2500

10

5

Daye Non-Ferrous Metals Co., Ltd.

19930301

Dajiang

Standard

810*760*5-7

2100

12

1030*1000*10-12

2500

10

6

Wuhu Hengxin Copper Group Co., Ltd.

19930301

Jingjing

Standard

820*820*7.5

1800

14

7

Luoyang Copper Group Co., Ltd.

19950824

Mudan

Standard

800*800*5

2500

10

8

Yantai Penghui Copper Industry Co., Ltd.

19951215

Sanjian

Standard

900*750*10

2500

10

9

Baiyin Nonferrous Metals Company

19960102

Honglu

Standard

820*820*5-8

2080

12

10

Jinchuan Non-Ferrous Metals Co., Ltd.

19961022

Jintuo

Standard

830*730*8-10

1470

17

20041230

JNMC

Standard

1030*1000*15

2500

10

11

Tianjin Datong Cpper Co., Ltd.

19971010

Datong

Standard

780*760*5-10

1400

18

12

Northern Copper Industrial Co., Ltd.

19980112

Zhongtiaoshan

Standard

900*740*10

2080

12

13

Anhui Chizhou Nonferrous Metal (Group) Co., Ltd.

19980112

Qingfeng

Standard

890*740*5

1800

14

14

Huludao Zinc Plant

19980120

Mengxin

Standard

780*780*5

1680

15

15

Shenyang Xinxing Copper Co., Ltd.

19980204

Zhongding

Standard

1000*900*10

2500

10

16

Jinlong Copper Co., Ltd.

19980424

Jintun

Premium

1035*1015*8-13

2500

10

17

Shanghai Dachang Copper Co., Ltd.

19980715

Hu

Standard

900*745*12-14

2500

10

18

Zhangjiagang United Copper Co., Ltd.

19990601

Tongguan

Premium

1000*740*14

2500

10

19

Meizhou Jinyan Industry Group Co.

19991101

Jinyan

Standard

790*780*5

1470

17

20

Guangzhou Zhujiang Copper Factory Co., Ltd.

19991101

Zhujiang

Standard

780*740*5

1550

16

21

Baotou Copper Smeltry

20000911

Jinguang

Standard

740*720*5

1050

24

22

Ningbo Jintian Copper (Group) Co., Ltd.

20010622

Jintian

Standard

900*750*10

2500

10

23

Nanhai Pacific Copper Co., Ltd.

20020315

Juqiong

Standard

1000*800*10

2500

10

24

Shandong Jinsheng Non-ferrous Group Co., Ltd.

20041230

Yimeng

Standard

900*780*12.5

2480

10

25

Hangzhou Fuchunjiang Smelting Co., Ltd.

20051213

Jinfeng

Standard

920*780*8-9

2240

11

26

Dongying Fangyuan Non-Ferrous Metal Co., Ltd.

20061102

Lufang

Standard

1020*810*10-12

2500

10

Note: Premium is 110 Yuan/ton

 

Appendix II: List of Copper Cathode registered with LME and Certified by SHFE for Delivery

 

Country

Designation

Country

Designation

Country

Designation

Austria

BRX

China

GUIYE

The Philippines

PASAR

Belgium

OLEN

TG

SME

JINTUN

Poland

HMG-B

Brazil

CbM

TIE  FENG

HMG-S

Canada

FKA

Finland

OKM

HML

NORANDA 

Indonesia

GRESIK

South Africa

PMC

ORC

Japan

DOWA

Spain

ERCOSA

Chile

ABRA

HM

FMS

AE

MITSUBISHI

Sweden

BK

AE SX EW

MITSUI

MB

OSR


United States

ATR

MV

SR

CB*CC

CCC

SUMIKO N

CTB

cCc-SX-EW

SUMIKO T

KUC

CCC-SBL

TAMANO

CMMC ER

CDA

Korea

ONSAN

P*D

CMCC

ONSAN

RAY

ENM

Norway

FHG

Zambia

MCM

ESOX

Oman

OMCO

REC

MIC-P

Peru

SMCV

 

MIC-T

SPCC-ILO

ZALDIVAR

SPCC-SXEW

 


Appendix III: Certified Delivery Warehouses of SHFE

 

No.

Certified Delivery Company

Office Address

Name of Warehouse

Warehouse Address

Tel/Fax

Contact

Zipcode

Arrival Station/Port

Offsite premium/discount standard

Shanghai Agent Address

Telephone

Contact

1

Shanghai Guo Chu Tian Wei Warehousing Co., Ltd.

Rm 2205 Futures Building, 300 Songlin Rd, Pudong, Shanghai

State Reserves Bureau Shanghai No.7 Branch

3965 Jiaotong Rd, Shanghai

86-21-68402666,

Fax: 68401286

Lu Li, Tang Jiming

200122

Shanghai West Railway Station

Standard Price

 

 

 

2

Zhongchu Development Stock Co., Ltd.

Shunyi Road, Beichen District, Tianji

Shanghai Wusong Branch

495 Tieshan Rd, Baoshan District, Shanghai

86-21-33794175,

     33790944

Fax: 21-33791143

Ding Siming

201900

The Line for Shanghai No.5 Steel Company

Standard Price

Rm 3103 Future Tower

21-68401578

Lin Dali

Shanghai Dachang Branch

257 & 310 Nanda Rd, Baoshan District, Shanghai

86-21-62500165,

     52843316

Fax: 62500166,   62508007

Hou Liqun, Jin zhenjia

200436

Taopu Station (The line for ZDS Dachang Branch )

Standard Price

 

 

 

3

Shanghai Qisheng Warehousing and Transportation Co., Ltd.

2280 Jianchuan Rd, Minhang District, Shanghai

Minhang Warehouse

 

86-21-64305295

Fax:64629397

Zhou Haimin, Gong Rongde

200240

Line 541, Minhang Station

Standard Price

Rm 1725 Dongfang Building

21-50623740,

50623741

Liu Wen, Zhou Lijuan

Line Fengsi, Fengbang Station

4

Shanghai Jinghong Industrial Co., Ltd.

No.68, Hedan Rd,Waigaoqiao Free Trade Zone, Shanghai

Shanghai Jinghong Industrial Co., Ltd.

No.68, Hedan Rd,Waigaoqiao Free Trade Zone, Shanghai

86-21-50640027

Fax:58668857

Cao Zhilin

200131

 

Standard Price

 

 

 


Detailed Trading Rules and Regulations of the Shanghai Futures Exchange

Trading

1.        Position Limit System Position limit is the maximum amount of speculative positions member or customer may hold, according to the calculations of a unilateral contract as prescribed by the Exchange.

The specific proportion and amount of copper futures contract position limits held by broker members, non-members and customers of the brokerage in different time periods as follows:

 Table 1: the amount and the specific ratio of Copper futures contract position limits in different time periods (Unit: Lot)

 

contract Listed to the last trading day 2 months before the delivery month

One month before the first delivery month

Delivery month

 
 

One Future Contract Position

Position Limit Ratio%

 

Broker members

Non-broker members

Investors

Broker members

Non-broker members

Investors

Broker members

Non-broker members

Investors

 

Copper

³120,000 lots

15

10

5

8000

1200

800

3000

500

300

 

Note: The table of a futures contract positions are calculated on a two-way basis, while the position limits for broker members, non-broker members and investors are calculated on a one-way basis. Position limits of broker members serve as the basis.

2.        Hedging Tradde 

To apply for hedging trade, the “SHFE Hedging Application Form” must be filled out, and relevant supporting documents for hedging products, trading positions, trading volume, and hedging time must be submitted as consistent with the application.

Hedging application shall be submitted before the 20th calendar day of the month immediately preceding the hedging contract delivery month and no late hedging applications for the delivery month will be accpeted by the Exchange. The Exchange shall review the hedging application within 5 trading days upon receiving the application mateials.

Approved hedging traders must establish positions at the positions and quotas as approved by the Exchange within the Exchange-approved position establishement period (at the latest the last trading day of the month immediately preceding the delivery month of the hedging contract). It shall not be reused from the first trading day of the month immediately preceding the delivery month.

 

The Exchange calculates separately the positions and deliveries of hedging trades, which under normal circumstances are not subject to position quotas.

 

Settlement

Settlement refers to business activities of calculation and allocation on trading margin, profit and loss, fees, settlement payments, and other related amounts of the members based on the outcome of the transaction and the relevant provisions of the Exchange.

1.      Daily settlement:

Members shall open special fund accounts at depository and custodian banks to deposit margin and related amount.The Exchange shall adopt the Account Splitting Management over margins that members deposit in their special settlement accounts. The Exchange also adopts a marked-to-market system under which after the closing of daily trade, the Exchange settles the gain and loss, trading margin, transaction fees, tax and so on at the settlement price of the day, transfers accounts receivable and payable in net amount at once, and increases or decreases member’s settlement margin correspondingly.

Margin call: Members must top up the deficiency before the market opens on the next trading day if the settlement margin is lower than minimum balance after the settlement when the market is closed on a day. In case of failure to top it up, if the balance of settlement margin is lower than the minimum balance but higher than zero, such member is prohibited from opening a new position; if the balance of settlement margin is lower than the minimum balance and less than zero, the Exchange will impose “forced liquidation” according to the applicable risk control and management rules.

 

2. Trading margin:

l  Being already occupied by the contact, trading margin refers to the funds members deposit in the Exchange’s special settlement account to ensure contract fulfilment.

l  The Exchange adjusts trading margin based on different operational stages and open interests in copper futures contract. The specific methods are as below:

l  Margin requirements differentiated according to the size of open interest (OI) in copper futures contract

 

As from the 1st  trading day of the 3rd month before the delivery month, when the total open interest (X) reaches the following:

Margin rate

X≤120,000

5%Note2

120,000<X≤140,000

6.5%Note3

140,000<X≤160,000

8%

X>160,000

10%

Note: 1.X denotes the total bilateral OIs (in lots) for the contract of one month.

     2. A margin rate of 7% is applicable to copper futures contracts temporarily.

     3. Current margin rates shall prevail if a margin rate is higher than 6.5%.  

During the trading, the margin requirements will not be adjusted temporarily when the OI in one copper futures contract reaches the total OIs for one level. If, at daily settlement, OI in one copper futures contract reaches the total OIs for one level, the Exchange collects the trading margin corresponding to the total OIs for this level for the total OIs in this contract. Any deficiency in the margin shall be topped up by the market opening on the next trading day.

The Exchange adjusts trading margin for different operational stages of futures contract (closing on the delivery date) as follows:

 

l  Margin requirements differentiated according to different operational stages of copper futures contract

 

Trading Period

Copper Trading Margin Percentage

From the day when the contract is listed

5%7%temporarily

From the 10th trading day of the 2nd  month before the delivery month

7%

From the 1st trading day of the 1st  month before the delivery month

10%

From the 10th  trading day of the 1st  month before the delivery month

15%

From the 1st  trading day of the delivery month

20%

From two trading days before the last trading day

30%

 

l  When a copper futures contract reaches to the extent that adjustment to trading margin shall be made, the Exchange should settle all the historical positions of the contract using new margin rate when making settlement on one trading day before the execution of the new rate. Any deficiency in the margin shall be topped up by the market opening on the next trading day. After entering the delivery month, the seller can use standard warrant as the contract performance guarantee of OI in the delivery month futures contract whose amount is the same as that shown in the warrant, and the trading margin corresponding to such OI is not collected.

l  When a copper futures contract closes up at the price limits, the margins of the futures contracts are increased in its daily settlement as follows: the rate of margins of copper futures contracts is raised to 7% in daily settlement on the first trading day in which the trading closes up at the situation of one-side market, or it remains unchanged if the original rate is higher than 7%; and such rate of copper fuutres contracts is raised to 9% in in daily settlement on the second trading day in which the trading closes up at the situation of one-side market at the same direction as the previous trading day, or it remains unchanged if the original rate is higher than 9%... (See the Rules on Risk Control)

l  The trading margin collected by broker members from their clients shall not be less than that imposed by the Exchange on the members.

 

3. Title certificates as margins:

Title certificates refer to those held by the members or their clients, and then submitted by the members in the form of electronic standard warrants through the Exchange’s standard warrant management system to the Exchange for examination and deposit after the members apply for and obtain the approval from the Exchange or entrusted by their clients to do so. Standard warrants as margins provide the performance guarantee of trading margin indebtedness. However, such a pledge of title certificates is only applicable to the trading margin, and payables such as losses, fees and taxes shall still be paid in monetary funds.

(1)Title certificates that can work as magins:

Standard warrants registered by the Exchange, and any other title certificates approved by the Exchange.

 

(2) The value of title certificates is calculated as follows:

l  The market price of standard warrants is calculated with the daily settlement price of the futures contracts in the latest delivery month as benchmark price. And no more than 80% of the market value of the standard warrants as margins.

l  The value of the standard warrants that can work as margins is called value after discount, which is the result of deducting discount from the market price of standard warrants. The Exchange may allow a maximum of 4 times of the existing monetary capital (quota multiplier) in the members' special settlement account to serve as margins, and the actual usable value of title certificates as margins is the smaller one between the value after the discount and the maximum quota.

l  The benchmark price of other title certificates as margins is set by the Exchange.

l  The value of title certificates as margins is calculated accordingly with the movement of the daily settlement price of futures contracts.

(See Chapter VI Title Certificates, Detailed Clearing Rules of Shanghai Futures Exchange)

Delivery

1.  Delivery settlement price: the settlment price of the last trading day

 

2.  Delivery unit: 25 tons of copper cathodes for each standard warrant, with no more than+2% of the overfilled and underfilled, as well as no more than+0.2% of the scale difference.

 

3.  Packaging of delivered products

l  Packaging of domestic products: each delivery unit must consist of copper cathodes produced by the same enterprise with the same registered trademark, quality grade and shape of piece as well as approxinmate weight. The registered enterprise may decide the weight of a bundle by itself but shall make it easy to compose a lot. Each bumdle of copper cathodes will be bound with 30-32*0.9-1.0mm antirust steel strips in shape of #. The package shall be strong enough with conspicuous and durable marks and weight, and the maximum weight of a bundle shall not exceed 2.5 tons.

l  Packaging of imported products: The imported products will be delivered with the original tight and strong package. The maximum weight of a bundle is 4 tons.

l  Any arrived products with broken or seriously rusty steel strips or in bulk shall be repacked tightly with the required steel strips and then used for delivery. The packing charges are at the owner’s expense.

 

4. Required documents for delivered products

● Domestic products: Certificate of Quality issued by the registered manufacturer must be presented.

● Imported products: Certificate of Quality, Origin Certificate, Commodity Inspection Certificate, Customs Payment Form of VAT, which take effect after examination and approval of the Exchange, must be provided.

 

5. Delivery settlement procedures

  SHFE adopts a 5-day delivery system as follows:

(1)On the first delivery day

● Members with long positions report their intention of purchase. Members with long positions shall submit a letter of intent concerning the needed products covering such items as varieties, trademarks, quantity and the name of the certified warehouse.

● Memebrs with short positions submit their standard warrants.Members with short positions shall send the valid standard warrants with storage fee paid to the Exchange.

(2)On the second delivery day

The Exchange allocates standard warrants. On the second delivery day, the Exchange may allocate the available standard warrants to the members with long positions in principles of time priority, fraction-truncation for the quantity of underlying assets, near-place matchinhg and overall planning.

(3)On the third delivery day

●Members with long positions shall make the payment and obtain the standard warrants before 14:00 on the third delivery day in the Exchange.

●Members with short positions receive the payment. The Exchange will pay the members with short positions before 16:00 on the third delivery day.

(4)On the fourth and fifith delivery days

Members with short positions shall submit VAT invoices.

 

6. Procudures for the physical delivery of standard warrants at the Exchange

(1)Clients with short positions transfer standard warrants to broker members with short positions for physical delivery after the endorsement.

(2)Broker members with short positions transfer standard warrants to the Exchange after the endorsement.

(3)The Exchange allocates the standard warrants among members with long positions.

(4)Members with long positions transfers standard warrants to clients with long positions after the endorsement.

 

7. Exchange for physical (EFP)

EFP means that members (or their clients), who hold contracts of the same month but in opposite directions and apply to Shanghai Futures Exchange (“the Exchange”) for closing their positions at the price stipulated by the Exchange, exchange their warrants at the agreed price covering products with the same quantity, variety and direction as that of the underlying products of the futures contracts.

Warrants mentioned herein refer to both standard and non-standard warrants. Non-standard warrants are the warrant issued by warehouses under the following circumstances: registered products stored at non-desiganted delivery warehouses; and non-registered products stored at non-registered delivery warehouses.

l  Duration of EFP: from the first trading day after the last trading day of the previous month before the delivery month of the contracts to be exchanged till the second trading day (inclusive) before the last trading day of the delivery month.

l  EFP positions processing: The Exchange will close the original positions of both parties applying for EFP before 15:00 on the application day at the settlement prices of the contracts with the same delivery month on the previous day.

l  EFP trading margins (Delivery margins): calculated on the basis of the settlement price of the contracts with the same delivery month on the previous day before the application day.

(See Chapter VII Exchange for Physical, Detailed Delivery Rules of Shanghai Futures Exchange)

  

8Warrants market

● As an information platform established on the homepage of the Exchange, this warrants market is designed to offer an information exchanging opportunity for both parties intended for the sales and exchange of warrants, thereby strengthening the organic connection between the futures market and physical market. However, both parties to such trading shall make determination through negociation on their own, and the Exchange shall not be liable for any liabilities arising therefrom.

● Click the warrants market module on the homepage of the Exchange (www.shfe.com.cn) to access the warrants market.

 

9. Fees standard for the delivery warehouses

 

 

Prices of certified delivery warehouses

Servcies

Warehousing rents

 

Caculated on the daily basis, commercing from the load-in date

1.Storeroom

0.40 yuan/ton/day

2.Freight yard

0.25 yuan/ton/day

Load-in fees

 

Unloading the goods to allocated lots, including sorting, superficial inspection, quantity and weight counting, document verification, lifting and stacking, coding and labeling, establishing bookkeeping records, issuing warrants and so on.

1.Transport via special line

24 yuan/ton

2.Transport arranged by clients

15 yuan/ton

Load-out fees

 

Verifying shipment, loading, releasing load-out permit, accompanying weight note and quality certificate with the products, writing off internal accounts and so on.

1. Transport via special line

24 yuan/ton

2.Picked up by clients

10 yuan/ton

Transfer fee

3 yuan/ton

Changing the warrant title, retrieving the original warrant and issuing the new one, and adjusting relevant bookkeeping accounts.

Sorting fee

5 yuan/ton

bulk cargo bundling, sorting and stacking

Commissioned agency for railway wagons booking

5 yuan/ton

Making arrangements for railway wagons plan

Commissioned agency for loading and transport

2 yuan/ton

Shipment receiving, delivering and hand-over (transport fees exclusive)

Speedy handling fee

3 yuan/ton

Upon the request of our clients, those workloads that cannot be fulfilled during the normal operational hours will be handled with speedy handling fee charged.

Packing fee

20 yuan/ton

Each bumdle will be bound with 30-32*0.9-1.0mm antirust steel strips in shape of #, and the package shall be strong enough.

 

Attachment