Bank of China subsidiary BOCI has completed its first trade on the LME's fob China hot-rolled coil (HRC) contract on behalf of a client.
BOCI is the first Chinese bank trading the LME Steel HRC FOB China contract, which could boost liquidity in the nascent but growing market. Seven banks are already using the risk management tool.
"The LME steel contracts are providing BOCI with the tools we need to meet the global risk management and investment needs of our steel customers in China and globally," managing director and global head of commodities of BOCI Arthur Fan said.
BOCI Global Commodities acting CEO Yao Lei said that the LME contract is reaching the "tipping point" to become a truly liquid instrument.
The entrance of BOCI and others is already stimulating liquidity. October is already the second-largest month in volumes traded, with 5,175 lots changing hands and a few trading days left. The largest month so far was September, when 6,854 lots were traded.
Open interest, often seen as the true barometer of a derivative contract's health, is now at a record. There are currently 3,501 lots of open interest, substantially up from the previous record — which was also hit last month — of 2,655.
"Steel derivatives in China are among the most liquid commodities markets in the world, and until recent times there was a lack of an equivalent market outside of China that we could use to meet the needs of BOCI's clients. For this reason, we welcome the LME steel contracts and BOCI is really excited to engage in the development of the LME steel markets on behalf of our clients in China and globally," chief operating officer of BOCI Global Commodities Raymond Lau told Argus.
