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Introducing a brand delivery system to revitalize PVC futures
2023/11/22
Physical delivery is the fundamental institutional arrangement of China's commodity futures market, serving as a bridge connecting the futures and spot markets. It plays an important role in meeting spot delivery requirements, promoting resource allocation, and preventing and controlling risks. In 2015, Dashang implemented a delivery registration brand system for PVC varieties, promoting the vitality of PVC futures and laying the foundation for the expansion and promotion of the brand delivery system in the future.
Evolution of spot market pattern, mainstream brands are more favored
PVC is an important organic synthetic material in China, belonging to the five major types of universal synthetic resins along with PE and PP. Its products are widely used in industries, construction, and agriculture. On May 25, 2009, PVC futures were listed on the Shanghai Stock Exchange, providing an effective tool for risk management for industrial enterprises.
The reporter learned that in the early stages of PVC futures listing, products that meet delivery quality standards can participate in delivery, so sellers tend to choose non mainstream brand products with the cheapest spot prices for delivery. This brings inconvenience to the subsequent production of enterprises after receiving goods, and affects their enthusiasm to participate in futures.
With the development of the PVC industry and years of market-oriented competition, the PVC spot market has undergone significant changes. The situation of a large number of factories, small production scale, dispersed regions, and low product quality standards has been improved.
From 2013 to 2015, the supply in the plasticizing industry exceeded demand, and the price of PVC decreased year by year, causing many upstream enterprises to be in a loss state. After the survival of the fittest in the market, the concentration of upstream enterprises increased. The brand products of major manufacturers have significant advantages in sales volume, quality, and downstream enterprise recognition. By 2016, the top ten domestic PVC production enterprises had a total annual production capacity of 8.26 million tons, accounting for 36.67% of the national total. The industry concentration had increased, and the overall product quality and technical standards had also improved.
At this stage, the plasticizing market has strong brand characteristics in spot trade and consumption, with significant differences in prices between mainstream and non mainstream brands, with some brands having a price difference of 200-400 yuan/ton. Relevant market experts have stated that although mainstream brand products have slightly higher prices, they have advantages such as stable supply, excellent quality, and high production ratio, making them more favored by downstream enterprises.
Therefore, if the seller chooses non mainstream brand products with lower spot prices for delivery, it will to some extent affect the enthusiasm of the buyer's enterprise to participate in futures delivery.
Introducing a brand delivery system to revitalize functions and unleash vitality
In order to comply with the trend of centralized and branded market development, Dashang Institute began promoting the research delivery registration brand system in 2012 and implemented it for the first time on PVC futures in March 2015. The first batch announced 9 delivery brands and 1 inspection free brand. The brand delivery system stipulates that only brands registered on the exchange can participate in futures delivery, in order to ensure that the delivered products entering the delivery process are mainstream brands recognized in the spot market.
The delivery registration brand system sets entry thresholds, clarifying that only some popular and mainstream spot brands in the spot market can participate in delivery, ensuring the liquidity of delivered goods and the enthusiasm of enterprises to participate in delivery. "The relevant person in charge of Tomorrow Holdings stated that for delivery buyers, the brand delivery system improves the quality of delivered goods, promoting the quality of delivered goods to be significantly higher than the industry average standard, By delivering, more "high-quality and affordable" sources of goods can be obtained. For delivery sellers, they can coordinate and prepare for the delivery of goods in advance, increase delivery convenience, and make the delivery brand synonymous with high-quality products. At the same time, it enhances the brand and product awareness of the seller's enterprise, and promotes the overall quality of industrial products.
After implementing brand delivery, the effect is immediate. In 2016, the delivery volume of PVC futures increased by 293%, and the trading volume, daily average holdings, and number of corporate clients of PVC futures all increased by over 200% year-on-year. With successful experience in implementing PVC futures, the Da Shang Exchange released the delivery brand work method in December 2018, promoting the delivery registration brand system to LLDPE and PP varieties, and promoting the high-quality development of the futures market in serving the chemical industry.
After 2015, the increase in market activity is evident to all. From the perspective of participating entities, in addition to midstream enterprises in the industry chain, more large downstream enterprises have gradually participated, and market specialization competition has intensified. Overall, during this stage, the futures price discovery function has become more prominent. "said the relevant person in charge of Tomorrow Holdings.
Focusing on the needs of physical industries and serving leading enterprises for better participation
As the futures market functions more fully, major upstream industries such as state-owned leading enterprises are also participating in the futures market for risk hedging. The following problem is that although upstream state-owned leading enterprises have a high product coverage rate, due to many limitations such as production and sales separation, complex internal approval processes, and difficulty in providing approval materials, state-owned leading enterprises have pain points and difficulties in applying for delivery registration of brands, and delivery needs are difficult to meet.
For example, in the old version of the delivery registration brand work method, it was required that the applicant enterprise must be a production enterprise legal person engaged in related goods, while some state-owned leading enterprises operate production and sales separately, resulting in sales subsidiaries intending to apply for registration of delivery brands but not receiving support from production subsidiaries. For example, some industrial enterprises have factories built for a long time, and it is difficult to provide relevant materials such as project approval and environmental acceptance, resulting in their inability to register and deliver brands.
In order to better serve state-owned leading enterprises in participating in the futures market, solve problems such as difficulty in applying for delivery and registration of brands, and difficulty in participating in futures delivery business, enhance the participation of industrial state-owned leading enterprises, and enable industrial enterprises to play a leading role in market pricing, the Dalian Commodity Exchange has implemented the "I do practical things for the people" and revised the "Dalian Commodity Exchange Futures Delivery and Registration Brand Work Measures", The "Dalian Commodity Exchange Synthetic Resin Futures Delivery and Registration Brand Work Measures" were released in December 2022 and officially implemented from April 1, 2023, while abolishing the old version of the delivery and registration brand work measures.
Specifically, the first is to lower the threshold requirements for brand qualification application from the institutional level, including clarifying the scope of application of the method, modifying the variety business rules, and deleting cumbersome regulations in the exemption and delivery process; The second is to refine the daily management of brands, adjust from "strict entry and strict management" to "strict entry and strict management", cancel the requirement that brand applicants must be brand owners, and add regulatory conditions such as annual reporting of brand enterprise operations and suspension or cancellation of brand qualifications; Thirdly, further simplify the process of inspection free delivery and delete some specific requirements for paper materials required for inspection free delivery in the business rules of the three plastic futures varieties; The fourth is to establish a connection between brand system and factory inventory system, allowing enterprises to apply for both brand and factory inventory qualifications at the same time, and only one copy of duplicate materials needs to be provided.
The modification of the delivery registration brand work method has fully lowered the threshold requirements for brand application, simplified the inspection free delivery process, and allowed more mainstream brands in the market to enter the delivery process, providing convenience for more industrial enterprises to participate in futures trading and delivery business. At the same time, refining the daily management of the brand is beneficial for plasticizing enterprises to have a clearer understanding of the goods brand when carrying out pricing, delivery, and other business to match products to downstream The person in charge of Tomorrow Holdings stated.
Evolution of spot market pattern, mainstream brands are more favored
PVC is an important organic synthetic material in China, belonging to the five major types of universal synthetic resins along with PE and PP. Its products are widely used in industries, construction, and agriculture. On May 25, 2009, PVC futures were listed on the Shanghai Stock Exchange, providing an effective tool for risk management for industrial enterprises.
The reporter learned that in the early stages of PVC futures listing, products that meet delivery quality standards can participate in delivery, so sellers tend to choose non mainstream brand products with the cheapest spot prices for delivery. This brings inconvenience to the subsequent production of enterprises after receiving goods, and affects their enthusiasm to participate in futures.
With the development of the PVC industry and years of market-oriented competition, the PVC spot market has undergone significant changes. The situation of a large number of factories, small production scale, dispersed regions, and low product quality standards has been improved.
From 2013 to 2015, the supply in the plasticizing industry exceeded demand, and the price of PVC decreased year by year, causing many upstream enterprises to be in a loss state. After the survival of the fittest in the market, the concentration of upstream enterprises increased. The brand products of major manufacturers have significant advantages in sales volume, quality, and downstream enterprise recognition. By 2016, the top ten domestic PVC production enterprises had a total annual production capacity of 8.26 million tons, accounting for 36.67% of the national total. The industry concentration had increased, and the overall product quality and technical standards had also improved.
At this stage, the plasticizing market has strong brand characteristics in spot trade and consumption, with significant differences in prices between mainstream and non mainstream brands, with some brands having a price difference of 200-400 yuan/ton. Relevant market experts have stated that although mainstream brand products have slightly higher prices, they have advantages such as stable supply, excellent quality, and high production ratio, making them more favored by downstream enterprises.
Therefore, if the seller chooses non mainstream brand products with lower spot prices for delivery, it will to some extent affect the enthusiasm of the buyer's enterprise to participate in futures delivery.
Introducing a brand delivery system to revitalize functions and unleash vitality
In order to comply with the trend of centralized and branded market development, Dashang Institute began promoting the research delivery registration brand system in 2012 and implemented it for the first time on PVC futures in March 2015. The first batch announced 9 delivery brands and 1 inspection free brand. The brand delivery system stipulates that only brands registered on the exchange can participate in futures delivery, in order to ensure that the delivered products entering the delivery process are mainstream brands recognized in the spot market.
The delivery registration brand system sets entry thresholds, clarifying that only some popular and mainstream spot brands in the spot market can participate in delivery, ensuring the liquidity of delivered goods and the enthusiasm of enterprises to participate in delivery. "The relevant person in charge of Tomorrow Holdings stated that for delivery buyers, the brand delivery system improves the quality of delivered goods, promoting the quality of delivered goods to be significantly higher than the industry average standard, By delivering, more "high-quality and affordable" sources of goods can be obtained. For delivery sellers, they can coordinate and prepare for the delivery of goods in advance, increase delivery convenience, and make the delivery brand synonymous with high-quality products. At the same time, it enhances the brand and product awareness of the seller's enterprise, and promotes the overall quality of industrial products.
After implementing brand delivery, the effect is immediate. In 2016, the delivery volume of PVC futures increased by 293%, and the trading volume, daily average holdings, and number of corporate clients of PVC futures all increased by over 200% year-on-year. With successful experience in implementing PVC futures, the Da Shang Exchange released the delivery brand work method in December 2018, promoting the delivery registration brand system to LLDPE and PP varieties, and promoting the high-quality development of the futures market in serving the chemical industry.
After 2015, the increase in market activity is evident to all. From the perspective of participating entities, in addition to midstream enterprises in the industry chain, more large downstream enterprises have gradually participated, and market specialization competition has intensified. Overall, during this stage, the futures price discovery function has become more prominent. "said the relevant person in charge of Tomorrow Holdings.
Focusing on the needs of physical industries and serving leading enterprises for better participation
As the futures market functions more fully, major upstream industries such as state-owned leading enterprises are also participating in the futures market for risk hedging. The following problem is that although upstream state-owned leading enterprises have a high product coverage rate, due to many limitations such as production and sales separation, complex internal approval processes, and difficulty in providing approval materials, state-owned leading enterprises have pain points and difficulties in applying for delivery registration of brands, and delivery needs are difficult to meet.
For example, in the old version of the delivery registration brand work method, it was required that the applicant enterprise must be a production enterprise legal person engaged in related goods, while some state-owned leading enterprises operate production and sales separately, resulting in sales subsidiaries intending to apply for registration of delivery brands but not receiving support from production subsidiaries. For example, some industrial enterprises have factories built for a long time, and it is difficult to provide relevant materials such as project approval and environmental acceptance, resulting in their inability to register and deliver brands.
In order to better serve state-owned leading enterprises in participating in the futures market, solve problems such as difficulty in applying for delivery and registration of brands, and difficulty in participating in futures delivery business, enhance the participation of industrial state-owned leading enterprises, and enable industrial enterprises to play a leading role in market pricing, the Dalian Commodity Exchange has implemented the "I do practical things for the people" and revised the "Dalian Commodity Exchange Futures Delivery and Registration Brand Work Measures", The "Dalian Commodity Exchange Synthetic Resin Futures Delivery and Registration Brand Work Measures" were released in December 2022 and officially implemented from April 1, 2023, while abolishing the old version of the delivery and registration brand work measures.
Specifically, the first is to lower the threshold requirements for brand qualification application from the institutional level, including clarifying the scope of application of the method, modifying the variety business rules, and deleting cumbersome regulations in the exemption and delivery process; The second is to refine the daily management of brands, adjust from "strict entry and strict management" to "strict entry and strict management", cancel the requirement that brand applicants must be brand owners, and add regulatory conditions such as annual reporting of brand enterprise operations and suspension or cancellation of brand qualifications; Thirdly, further simplify the process of inspection free delivery and delete some specific requirements for paper materials required for inspection free delivery in the business rules of the three plastic futures varieties; The fourth is to establish a connection between brand system and factory inventory system, allowing enterprises to apply for both brand and factory inventory qualifications at the same time, and only one copy of duplicate materials needs to be provided.
The modification of the delivery registration brand work method has fully lowered the threshold requirements for brand application, simplified the inspection free delivery process, and allowed more mainstream brands in the market to enter the delivery process, providing convenience for more industrial enterprises to participate in futures trading and delivery business. At the same time, refining the daily management of the brand is beneficial for plasticizing enterprises to have a clearer understanding of the goods brand when carrying out pricing, delivery, and other business to match products to downstream The person in charge of Tomorrow Holdings stated.
It can be seen that on the basis of the physical delivery system, the delivery registration brand system launched by Da Shang on plastic futures is an important measure for the futures market to serve the real economy, promoting more high-quality plasticized goods to enter the delivery process, enhancing the linkage of the chemical industry futures and spot market, the representativeness of futures prices, and the confidence of participating parties, so that futures prices truly reflect the mainstream market prices, further promoting the effective functioning of the market.
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