China blocks Shanghai Gold Exchange platinum contract

Release time：May 20, 2019 From：admin

The Shanghai Gold Exchange has delayed plans for a platinum contract after failing to gain political clearance, threatening a push to open up a market for the precious metal dominated by the arm of a big state-owned company. The SGE had been due to launch a two-way cash-settled contract — enabling users to sell and buy platinum — in the first quarter but it failed to gain approval, according to two people familiar with the exchange. The failure highlights the difficulties of reforming China’s domestic commodity markets, where state-owned companies hold large sway. A platinum contract in China would have given carmakers in the world’s largest car market the ability to hedge the platinum they use in their catalytic converters or fuel cell vehicles. Investors would also have been able to speculate on prices of the metal. China is the world’s largest consumer of platinum, using 73.8 tonnes of platinum last year, a third of global demand, according to Johnson Matthey. “It’s quite a setback for the market,” said one industry source in China. There are two main platinum contracts in the world, on the CME exchange in New York and the Tocom exchange in Japan. China’s commodities markets are some of the most active in the world, with a greater share of retail investors than in the US and Europe. But China’s platinum market is dominated by China Platinum Company, which is owned by state-owned Citic. In 2003 it was awarded an exemption on paying value added tax on the platinum it imports into China, giving it a big advantage in the market. Its dominance over the market, however, has been eroded in recent years due to imports of platinum via unofficial routes as well as increased use of recycled metal. Some users are also importing platinum and paying the VAT. The platinum contract was opposed by the company, according to one of the people. Reached by phone, CPC said it did not have anyone who handled media requests. The Shanghai Gold Exchange, which imports all the gold into China, was set up in 2002 by the People’s Bank of China and is supervised by the central bank. Users can only buy physical platinum from the exchange but not sell it back. The Shanghai Gold Exchange, which paid a visit to London in the past week, is now considering a contract targeted at foreign investors on its international board, the two people said, but no timetable had been set. Mined mostly in Russia and South Africa, platinum is used in jewellery and in catalytic converters for diesel cars. It is also increasingly used in fuel cells in China, which are used to power hydrogen vehicles. The SGE declined to comment.