Serving the Global Market and Jointly Building Domestic and Overseas Markets——DCE’s Oils and Oilseeds Derivatives Market is Booming
Date:02 April 2021

The Virtual Palm and Lauric Oils Price Outlook Conference 2021 (Virtual POC2021), which was held by Bursa Malaysia Derivatives Berhad (BMD), took place online on March 23. Cheng Weidong, Vice President of Dalian Commodity Exchange (DCE) delivered a video speech in which he said that DCE will, with a vision of building a world-class derivatives exchange, promote the opening up of oils and oilseeds derivatives market on multiple fronts, speed up the launching and opening of RBD palm olien options to foreign investors, and open DCE’s market to QFII/RQFII. The objectives are to improve its services for domestic and overseas enterprises to manage their cross-market risks and contribute to the building of the market along the “Belt and Road”.

According to Mr. Cheng, Malaysia and China, which are friendly neighbors linked by sea, have formed close economic and trade ties. China is Malaysia’s largest trading partner for 12 consecutive years. As the vegetable oil with the largest production and trading volume on the global market, the palm oil has become one of the key commodities traded between the two countries. While Malaysia is an important palm oil producer, China is the world’s second largest importer and third largest consumer of the palm oil, as well as the second largest export destination of palm oil produced in Malaysia. In 2020 alone, China imported 2.74 million tonnes of palm oil from Malaysia, up 9.9% YoY. The steady development of economic and trade ties has paved the way for the cooperation and development of the derivatives market of both sides.

It is learned that since listed on DCE, the RBD palm olein futures has been playing important role in discovering mid and long-term prices, helping the enterprises avoid price risks and boosting the sustainable development of China and global palm oil industry. In 2020, 315 million lots of RBD palm olein futures were traded on DCE, surging by 132% YoY, with average daily open interest reaching 510,000 million lots, up 23% YoY. The trading volume and the open interest of entity clients, who have gradually become dominant forces in the market, accounted for 33% and 52% of the total respectively. In addition, futures and physical markets were closely linked while both domestic and overseas investors can trade on DCE. The price correlation coefficient between DCE’s RBD palm olien futures and physical market reached 0.98. The coefficient between DCE’s RBD palm olein futures and BMD’s crude palm oil futures reached 0.95. By far, the world’s major grain and oil enterprises are all important participants of DCE market. 70% of palm oil spot trade in China are based on DCE’s futures price and the palm oil importers who are directly involved in DCE market to manage risks account for more than 85% of the country’s total import.

Mr. Cheng pointed out that the futures of oils and oilseeds is one of the most mature product series developed by DCE, with high degree of participation among enterprises and institutions, and the functions of futures have been brought into full play. In 2020, the total trading volume of oils and oilseeds products including RBD palm olein, soybean meal, soybean oil and soybean futures recorded 930 million lots, up 74% YoY. Their average daily open interest reached 3.92 million lots, up 37% YoY. In terms of trading volume, soybean meal, RBD palm olein and soybean oil futures on DCE took the first, second and fourth place among the global agricultural futures and options. DCE market has played a positive role as a haven in helping the businesses fight against COVID-19 pandemic and managing price fluctuation risk.

He also noted that, over recent years, DCE has continuously promoted innovation and improved hedging chain for oils and oilseeds industry by listing soybean meal options, opening RBD palm olein futures to overseas investors as well as launching over-the-counter (OTC) business such as commodity swap and standard warehouse receipt and index products. By doing so, DCE is stepping forward on its way to build a complete derivatives product system with tools such as futures, options and swaps. Meanwhile, DCE also aims at integrating futures and physical, synergizing exchange and off-exchange, and connecting domestic and overseas markets. Next, DCE will promote the opening up of oils and oilseeds derivatives market on multiple fronts, speed up the launching and opening of RBD palm olien options to foreign investors, and open DCE’s market to QFII/RQFII. Furthermore, DCE will continue to deepen cooperation with overseas exchanges and relevant institutions for a win-win future.

DCE and BMD started the comprehensive cooperation since 2006. Over the last decade, both sides have worked closely in terms of information sharing, market promotion and product research. China International Oils and Oilseeds Conference in Guangzhou, co-sponsored by DCE and BMD, takes place annually in Guangzhou. It has become a prestigious event with the most recognition and influence among China’s oils and oilseeds community.

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