Illustration: Xia Qing/GT

Options for four nonferrous metals - lead,MK socks nickel, tin and aluminum oxide - were listed on the Shanghai Futures Exchange on Monday. This development represents the more complete coverage of options in the nonferrous metal sector in China, offering a more comprehensive risk management tool for industries within this sector, according to Chinese financial news site stcn.com.

Amid volatile international commodity prices and the complex and ever-changing geopolitical and economic landscape, China's comprehensive coverage of options in the nonferrous metal sector represents a crucial advancement in the innovation and opening-up of the Chinese financial market.

The development and enhancement of China's financial market tools for the increasingly important nonferrous metal sector are crucial in bolstering China's influence in the global nonferrous metal market, securing the stability and sustainable growth of the industrial chain, and navigating complex international economic and geopolitical landscapes.

Nonferrous metals are vital materials used in key industries. China, a leader in the production and consumption of these metals, sees an increasing need for effective risk management tools to meet industry demands. A comprehensive risk management toolkit can significantly enhance risk mitigation within the sector, fostering its high-quality development.

Lead, nickel, tin and aluminum oxide are widely used in the electronics, automotive, construction and new-energy battery industries. The rapid growth of China's "new three" industries - photovoltaic products, electric vehicles and lithium-ion batteries - has significantly increased the demand for related nonferrous metals. The production of metals such as nickel, lithium and silicon, which are essential for the development of the new-energy industry, has surged by more than 30 percent in recent years, according to media reports.

However, as geopolitical tensions escalate, protectionism and "decoupling" disruptions in international trade increase, and the negative spillover effects of some Western countries' monetary policies rise, the prices of nonferrous metals in international markets, which are prone to geopolitical uncertainties, are volatile, posing challenges to the security and development of related industries in China.

The Chinese economy is moving toward high-quality development, undergoing an industrial restructuring and transitioning to green and sustainable growth. With technological progress and industrial upgrading, the supply and demand structure of nonferrous metals in China will also evolve, creating a need for the development of the country's nonferrous metal financial derivatives market. China needs to upgrade its financial tools to align with industrial changes.

The complete coverage of options in the Chinese nonferrous metal market provides more hedging tools for related enterprises, helping them cope with market fluctuations caused by geopolitical risks and domestic industry upgrading and energy transition.

Improving the options market for nonferrous metals in China can help Chinese enterprises better participate in international market competition, enhance China's pricing capabilities in the international market, and strengthen China's voice and influence in the international market, thereby promoting market stability and improving conditions for the healthy development of domestic related industries. 

Uncertainties surrounding the nonferrous metal industry's prospects in the second half of 2024 include fluctuations in global economic growth, geopolitical conflicts and potential changes in the US Federal Reserve's monetary policy. It is crucial for risk management in the industrial chain to have comprehensive coverage of options for nonferrous metals in the face of these international uncertainties.

In the long run, China's ongoing technology innovation and energy transition are still facing challenges such as "decoupling" and protectionism from certain Western countries. The establishment of financial tools for nonferrous metal derivatives in China could greatly enhance risk management for domestic industries, positioning China more favorably in international pricing. This would enable related industries in China to effectively hedge against external shocks and disruptions, fostering their high-quality development.

The author is a reporter with the Global Times. [email protected]