Singapore 26/04/2016 - The Shanghai Futures Exchange (SHFE) has raised its transaction fees for its ferrous metal contracts following a huge jump in trading last week but market participants believe it is unlikely to do the same for its non-ferrous products.
The SHFE said last Thursday it would raise the transaction fees for its rebar and hot rolled coil contracts effective April 25.
"[But] I don't believe the SHFE will increase fees for non-ferrous contracts. The transaction fees for ferrous contracts were increased as they had hit trading limits in consecutive days," a Shanghai-based metals analyst said.
"The trading volume of non-ferrous contracts is normal as well. In comparison, the trading volume for rebar last week was abnormal," she added.
A total of 91.62 million lots of rebar contracts on the exchange changed hands last week, up from 73.28 million lots on the previous week. Some 23-24 million lots changed hands each day over April 21-22.
Volumes in the most active rebar contract had risen around 70 percent since November last year, with the October contract closing at 2,782 yuan per tonne on April 21, its highest since September 2014.
"The rebar contract hitting was hitting its trading limit every day - that was crazy. The aluminium and zinc contracts also hit their trading limits last week but that was only for a day or so," a Shanghai-based trader said.
In contrast, the SHFE's copper and aluminium contracts recorded volumes of 4.4 million lots and 2.39 million lots respectively across the whole of last week.
The SHFE June aluminium rose to hit its trading limit on April 22, closing at the day's high and also a 10-month high of 12,805 yuan per tonne.
The raising of transaction fees on the SHFE's ferrous contracts may have had the desired effect - trading volume in rebar was 35.15 million lots over Monday and Tuesday, with 14.38 million lots changing hands on Tuesday.
"What the SHFE did effectively lifted the barrier for entry for rebar contracts," a second Shanghai-based metals analyst said.
The decline in rebar trading was also because some funds squared off their positions last week on expectations of limited upside after its swift advance, analysts said.
Some funds have also switched to SHFE aluminium contracts, expecting domestic aluminium supply to tighten and demand to improve during the second quarter, providing further upside.
The SHFE's non-ferrous suite attracts speculators but not to the extent of its rebar contracts, which also attract many retail investors, market participants added.
Its rebar futures were the most traded metals futures globally last year when 541 million lots changed hands, up 32.6 percent from the previous year, according to the Futures Industry Association (FIA).
The SHFE's media relations department was unavailable for comment by press time.
(Editing by Mark Shaw)