Shenzhen-based QME gets tepid response on its alumina spot contract launched in October

Shenzhen-based Qianhai Mercantile Exchange (QME), controlled by Hong Kong Exchanges and Clearing, which started spot trading of alumina in October, has received tepid response from market participants.  The trading launch was long awaited for HKEX and its chairman Charles Li, who bought the London Metal Exchange (LME) in 2012 for access to the world’s biggest metals consumer.

The QME started it spot trading with alumina, considering the fact that alumina prices have soared this year amid U.S. sanctions on Rusal, outages at Norsk Hydro’s Alunorte alumina refinery and a strike at Alcoa’s operations in Western Australia.

The exchange published a statement saying its first spot transaction was of about 3,000 tonnes of alumina between Chalco Trade, a unit of state-run Aluminum Corp of China, and Xiamen Xiangyu, at a price of RMB 3,030 (US$437.23) a tonne.

However, over last one month, the spot platform has not been able to gather a good number of alumina market participants in China and the liquidity is slow. A Fast markets report says QME) plans to internationalize its yuan-denominated prices and list them on foreign exchanges such as Hong Kong Exchanges & Clearing Market (HKEX). However, alumina traders in China feel it is too early for the exchange to venture into international markets.

Traders say the focus should be on becoming the accepted benchmark in China.

“I don’t think the QME price is representative of the market because right now only two companies are active on the platform,” a buyer source in Gansu province said.

The LME is also expected to launch its own cash-settled alumina futures contract early next year. Shanghai Futures Exchange (Shfe) is also expected to release a draft alumina futures contract by the end of this year or early next year.