ZCE sets limits on FeSi contract while free market prices reach record highs

For the second time this year, madness has hit the Chinese ferrosilicon market. The ZCE’s January contract settled at rmb8,550 per mt, up rmb318 on a whopping 753,904 contracts trading hands, more than double the usual amount. However, the May contract fell rmb220 to rmb7,208 on turnover of 217,134 contracts so the backwardation continues to widen.

The exchange started cracking down on the speculation by hiking margin and tightening trade limits. And, the ZCE even banned one trader for three months for excessive trading in the ferrosilicon contract.

With the contract limited, the free market went WILD. Spot prices jumped to around rmb10,000 yesterday and there were reports of rmb12,000 being traded.

Foreign buyers of Chines ferrosilicon are frozen by the speculation, and are looking for alternative sources. However, overseas prices, especially in the Asian region, will soon begin, if they haven’t already, the Chinese price.

It’s madness – again

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