BSK Futures Greets the First Limit up Since Listing

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2020-09-04

BSK Futures Greets the First Limit up Since Listing

Under the influence of rising pulp import offers, downstream paper price rises and the anticipated peak season, the BSK futures attracted a lot of market attention lately. On August 31, after a 5% increase, the BSK futures had hit its very first limit up since its listing in November 2018, and the SP 2012 contract reached RMB 4,998/mt to the highest. The spot market price was also on the rise in August, prices of mainstream SWP brands rose by RMB 50-100/mt. As of August 31, the offer for Arauco BSK reached RMB 3,700-3,800/mt, up over RMB 200/mt from July. The rapid SWP price increase was mainly because of the surging futures price as well as the raised import offers from overseas producers. Due to the previous high offers, fewer shipments arrived in August, and the port inventory fell marginally. Also, as the autumn school semester was about to commence, participants in the downstream paper industries held bullish anticipation towards the future market and actively pushed paper prices upwards, and the profit and operating rates of some paper producers increased.

Besides, on August 28, SHFE introduced a factory warehouse delivery system into the physical settlement of pulp futures, adopting warehouses of certified market participants as designated delivery locations.

SHFE also promulgated a systematic regulation on the registration, circulation and cancelation of standard warehouse receipts issued by certified participants. Key take-outs include:

First, both pulp producers and traders are included in the scope of warehouse certification. Second, the warehouse receipt will remain valid for one year and six months after registration, and receipts exceeded the validation period cannot be used for physical settlement. Third, certified participants bear legal responsibility for the quality of the pulp delivered and must provide certified assurances to SHFE. Fourth, detailed regulations are set to settle disputes over delivery defaults, responsibilities of the receiving party as well as delivery quality.

Market participants suggest the factor warehouse delivery system is a practical supplement to the current delivery system, which will better serve the upstream and downstream participants and promote the function of the futures market.

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