On 28 June 2019, Qianhai Mercantile Exchange (QME) officially launched spot aluminium billets and aluminium rods, following the debut of its first product of alumina last year. 
 

On the first day of the launch of this new product, six industrial customers and physical traders including Chalco Trading, Shandong Lvdou, Shanghai Songzhou, Jiren Trading, Jiajia Supply Chain and Guangdong Dinghaishenzhen completed the first batch of transactions on the QME platform with a transaction volume of 437.76 tonnes and a transaction amount RMB6,204,745.40, producing the spot benchmark price of aluminium billets and aluminium rods based on real transactions.  As a representative of integrated dealers, Jiajia Supply Chain provided liquidity support for QME warehouse warrants based on the rights to the goods.
 

Both major nonferrous metals, aluminium billets and aluminium rods are widely used in construction, transportation, electric power, electronics, automobiles, aerospace and other fields, making them essential basic raw materials for national economic development.  In 2018, China's aluminium billet and aluminium rod outputs were 9.5 million tonnes and 12 million tonnes respectively, with a total market value of over RMB300 billion.  The aluminium billets launched on QME this time are standard ones in compliance of the provisions of the national standard "GB/T1196-2017" (with aluminium content of not less than 99.7%).  The aluminium rods, on the other hand, are solid casted round bars that conform to the provisions of the non-ferrous metal industry standard "YST 67-2012" and have the highest market share and liquidity with different specifications available including 90mm, 120mm and 178mm.  They are delivered to areas like Guangdong, Jiangsu, Henan and Shandong, basically covering the major areas in Mainland China with high electrolytic aluminium consumption.  QME will continue to diversify product types to cater to market and customers’ needs while progressively expanding the scope of delivery to cover more production bases and ports.

QME is a commodity spot trading platform established by the HKEX Group in Shenzhen.  By leveraging the credibility and market’s recognition of HKEX, it hopes to provide enterprises with modern supply chain infrastructure and services such as warehousing, delivery and settlement, thereby forming benchmark spot prices that can reflect the supply and demand fundamentals of the physical enterprises and further regulate the spot trading market for Mainland Chinese commodities, in turn supporting the development of the real economy.

At present, QME adopts the spot quotation and trading model whereby a participant publishes and quotes information like the price and quantity of the products intended to be sold or purchased through QME’s e-trading system and enters into an electronic transaction contract with a qualified counterparty who accepts his offer and takes up the products after the transaction in accordance with the principle of “first-come-first-served” and then completes the settlement with the producer warrant, warehouse warrant or by way of offline settlement.  The trading hours are 09:00 to 15:30 from Monday to Friday (except for national holidays and non-trading days as announced by QME). 

The aluminium billets and aluminium rods launched this time are divided into standard and non-standard ones, of which the standard ones follow the “online trading, online settlement & online delivery as per rules” model whereas the non-standard ones adopt the “online trading, online settlement & offline delivery at designated locations” model which resembles the operation practices of physical enterprises and better accommodates the customers’ needs for spot trading and delivery.

Since its opening on 19 October 2018, QME has always adhered to two principles in its business practice: 1. It insists that the trading parties must be corporate customers, thus ruling out the participation of individual customers.  2. It adheres to the objective of serving the enterprises only, with commodities traded to be physically delivered based on actual trades.  Since the participants are all physical enterprises and corporate customers to the exclusion of retail investors, transactions and settlement are mainly derived from the operational needs of the customers themselves and the actual price bargaining in the industry chain, instead of being driven by speculators, and thus can truly reflect the fundamentals of the supply and demand in the industry.  Similarly, given that the design of QME’s rules and construction of the platform system are oriented to physical delivery, the consequential contracts and invoices can also provide domestic/Mainland banks and financial institutions with an effective basis for verifying the authenticity of the trade background.

On 18 February 2019, the Chinese Central Government and the State Council expressly stated in the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area that, “to support the Qianhai Mercantile Exchange of the Hong Kong Exchanges and Clearing Limited in establishing a spot commodities trading platform for serving domestic and foreign clients, and explore a new mode to serve the real economy.”  In the days to come, QME will actively implement the Outline Development Plan and support the construction of the Greater Bay Area, in the hope that greater contributions can be made to the transformation and upgrading of physical industries.