To carry out the important  strategic  deployment of  “ prompt introduction of new commodity futures varieties including steel to meet the need of national and economic development ”  in the  “ Opinions of the General Office of the State Council on Promoting the Economic Development by Finance Currently ” , recently, the China Security Regulatory Commission (CSRC) has approved that the Shanghai Futures Exchange (SHFE) conducts trading of wire rod and deformed steel bar futures. According to  relevant  regulations in the  “ Regulation on Administration of Futures Trading ”  and the  “ Measures for the Administration of Futures Exchange ” , the CSRC will approve the listing of futures contracts at the SHFE as soon as possible after all preparations and relevant procedures are completed.

Steel, known as the  “ bone ”  of industry,  is  a kind of important industrial raw material. Steel industry, the backbone of the national economy, indicates the development level and comprehensive strength of national economy and society. In 1996, China ’ s steel output broke the record of 100 million tons for the first time, ranking China a country with the largest steel output in the world. Since then, China has always been the world leader in the steel output. In 2007, China boasted its steel output of 489 million tons, accounting for 36.4% of the total in the world and exceeding the sum of  the  steel outputs of the countries ranking 2nd to 8th. In addition, China has grown up to be the largest steel exporter around the world since 2006 and its steel export amount reached 62.64 million tons in 2007, thus playing an important role in the international steel market.

From 1993 onwards, China opened up the steel price in an all-around way and implemented a market-oriented pricing system. In a long time, the steel price fluctuates greatly with noticeable market risk.  Enterprises  of steel production, trading and consumption are not only short of authoritative price signal to arrange their production and operation, but also incapable of avoiding the risk in price fluctuation. In the current international financial crisis, enterprises in relevant industries made good performance by leveraging trading of non-ferrous metal futures such as copper and aluminum futures to tackle the risks in dramatic price fluctuation, and the demand of spot steel enterprises for price discovery and hedging through the steel futures market is increasingly strong.

The introduction of steel futures trade will bring the following merits: (1) facilitate regulation and perfection of the steel circulation market through establishment of a market  system  organically integrating the spot steel and the steel futures; (2) gradually optimize the steel price formation  system , guide the upstream and downstream steel enterprises to  reasonabl y arrange their production and operation, and help the government authorities grasp the market trend promptly and accurately so as to take adjustment and control   measures in time and ensure wise allocation of resources and balance of market demand and supply; (3) provide the enterprises of steel production, trading and consumption with a cost-efficient risk control method, thus improving their management, enhancing  their  competitiveness in the market and driving the stable development of the steel industry; (4) promote sound and orderly development of  the  steel industry and carry out the  “ Development Policies for the Iron and Steel Industry ”  earnestly by attracting and encouraging big eco-friendly hi-tech steel enterprises to register their products as delivery varieties (by way of brand registration); and (5) increase China ’ s influence on pricing in the steel trade and elevate the  competitiveness  of China ’ s steel industry in the international arena by taking advantage of China ’ s role as a large steel exporter. To sum up, the establishment of the steel futures market will give full play to its economic function, thus contributing to the national economic growth.

The steel classification is dynamic, with complex scale and numerous varieties. Upon careful  study  and deep survey, according to the actual condition of the spot market and the technical requirements for the design of futures contracts, it is relatively reasonable to take wire rod and deformed steel bar as trade targets for steel futures contracts. Recently, the SHFE has completed the advance design for the contracts on wire rod and deformed steel bar futures, including defining the contract targets characterized by common practice and large turnover, working out strict transaction, settlement and delivery  systems , and demonstrating such risk control measures as gradient deposit system, price limit system and position limit system. The CSRC will, on the premise that the market risk can be controlled, predicted and tolerated, according to relevant laws and regulations, approve the listing of steel futures contracts at the SHFE as soon as possible, instruct and urge the SHFE to well foster steel futures according to the market development, and perfect the steel futures variety system step by step.