Special Report: Global Financial Crisis

    SHANGHAI, March 27 (Xinhua) -- China's steel futures contracts began trading at 9 a.m. Friday on the Shanghai Futures Exchange (SHFE), with the base price for the major contract for reinforcing bars, or RB909, set at 3,399 yuan (499.85 U.S. dollars) per ton and that of wire rod WR909 at 3,199 yuan per ton.

    The September contract for rebars opened at 3,621 yuan, up 222 yuan, or 6.5 percent from the base price, and that of wire rod at 3,459 yuan, up 260 yuan, or 8.1 percent.

    The average price Thursday in major cities for physical steel wire was 3,339 yuan per ton and that for rebars hit 3,400 yuan per ton.

    For the first trading day, the permitted trading band was set at 10 percent, but it will be 5 percent from now on.

    Among steel products, rebars and wire rods have been in heavy demand because of the industrialization and urbanization process and thus had a sound and stable base of market trading, a SHFE official told Xinhua.

    According to the Shanghai Continent Futures Co., China is the largest producer of wire rods and rebars, with almost 50 percent of the world total in 2007, the latest full year for which figures are available.

    Taking the huge size of the steel market into consideration, the launch of steel futures would at least double the existing commodity futures market, said Ding Jie, general manager of CITICS China Securities Co. It would also link the futures market closer to the real economy.

    The launch of futures would help smooth large price fluctuations in the steel market, said Ding Zhijian, who works at the research institute under the Shanghai Baosteel Group.

    China lacks a benchmark factory price because the steel market is highly fragmented, according to Shanghai Continent Futures Co.

    The domestic steel futures market would strengthen China's bargaining power in international trade and make China one of the world's steel pricing centers, said Ding.

    Four other exchanges trade steel futures: the London Metal Exchange, the Dubai Gold and Commodities Exchange, the Chicago Mercantile Exchange and India's National Commodity & Derivatives Exchange.

    Permission to list steel futures contracts was given by the China Securities Regulatory Commission in February.