LONDON, July 13 -- Copper and zinc volumes on the Shanghai Futures Exchange (SHFE) surged in the second quarter of this year, reinforcing perceptions that prices on the exchange are fast becoming benchmarks for Asia.
Total copper futures volumes on SHFE rose 27 percent in the second quarter from the first quarter to 78 million tonnes, while those for zinc were up 77 percent at 178 million tonnes. That compares with rises of 15 and 107 percent respectively in the first quarter.
"Shanghai is developing into a benchmark for the region, I wouldn't be surprised to see stronger growth in Shanghai volumes going forward," said Eugen Weinberg, analyst at Commerzbank.
"In coming years, I wouldn't be surprised to see Shanghai overtake the London Metal Exchange, for Shanghai to become a global benchmark. It is logical to see the market moving East."
Others agree, citing China's vast appetite for natural resources and its plans to spend large amounts on improving and building infrastructure.
China is the world's largest consumer of industrial metals, accounting for more than 30 percent of global copper consumption estimated at around 19 million tonnes this year.
However, the London Metal Exchange (LME) is still the first port of call for most companies in the Americas and in Europe, partly because it sits in two time zones.
Other reasons why the LME is still the premier exchange for metals trading include China's currency, which is strictly controlled, and restrictions on foreign firms.
Total copper futures trading on the LME fell 3.9 percent in the second quarter to 181 million tonnes, from the first three months when the quarterly rise was 26 percent.
Both SHFE and the LME declined to comment on the data.
Trade sources say SHFE includes both sides of the deal in its volumes. The tonnage traded on SHFE has been calculated using the volumes numbers divided by two.
The LME data was provided by the exchange or taken from its website. SHFE data came from the Reuters database.
LME zinc futures volumes rose 11 percent in the second quarter from the previous three months to 120 million tonnes, compared with a 6.5 percent quarterly rise in the January-March period.
"Overall volumes on the LME are still growing because of the increased participation of funds and financial investors as opposed to years ago when the exchange was predominantly used by producers and consumer," said Daniel Major, analyst at RBS.
"Faster growth in Shanghai is partly because relative to the LME, it's a much less mature market. It's also because more trade and financial participants are using SHFE."
Metals industry sources say much of the volume going through SHFE is speculative.
"China has pumped a large amount of money into its economy over the last two years," a senior metals industry source said.
"They can't spend it all on things like cars and fridges and they don't have many investment options, they've been speculating on property, shares and commodities ... Stockpiles of metals in China are significant."
LME Mediterranean steel futures volumes surged 137 percent in the second quarter to 2.6 million tonnes from the first quarter. That compares with a 105 percent jump in the first quarter from the last quarter of last year.
SHFE steel rebar futures volumes rose 43 percent to 658 million tonnes in the second quarter from the first quarter. The rise in the first three months from the last three months of 2009 was 51 percent.
LME aluminium futures volumes rose 5.4 percent in the second quarter from the first three months of the year to 289 million tonnes, while those for SHFE aluminium jumped 37 percent to 19 million tonnes. In the first quarter over the final quarter of 2009 the numbers were 2.7 and 82 percent respectively.