China's CSRC Approves Polysilicon Futures to Manage Market

The China Securities Regulatory Commission (CSRC) has taken a significant step in addressing the issues of rising price volatility and structural imbalances in the solar-grade polysilicon market. By approving polysilicon derivatives, the CSRC aims to provide essential risk management tools for the solar supply chain. December 16, 2024 witnessed this important development, with Vincent Shaw reporting on the matter.

Key Milestones in the Polysilicon Derivatives Market

The Guangzhou Futures Exchange (GFE) has played a crucial role in this regard. It has revealed contract details and trading rules, along with an open call for designated delivery warehouses and quality inspection agencies. Polysilicon futures are set to begin trading on Dec. 26, followed by options on Dec. 27. The standard contract size for futures is 3 metric tons per lot.Initial trading margins are set at 9% of the contract value, with a daily price limit of 14% above or below the listing benchmark on the first trading day. After that, the margin and price limits will adjust to 9% and 7%, respectively, based on the prior day’s settlement price.The first contracts will include delivery months from June to December 2025, labeled PS2506 through PS2512. Trading will occur Monday through Friday, except on holidays, with specific morning and afternoon sessions.Futures will carry a transaction fee of 0.01% of the trade value, while options fees are set at CNY 2 ($0.28) per lot. Initial options orders will be limited to limit-price and stop-limit instructions, with a maximum batch size of 100 lots.

Geographic Focus of Delivery Warehouses

GFE is seeking delivery warehouses in key polysilicon production regions such as Inner Mongolia, Sichuan, Yunnan, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang. This reflects the industry’s geographic concentration and ensures the smooth functioning of the derivatives market.

Addressing Price Volatility and Market Needs

The approval of polysilicon derivatives is a timely response to the significant price fluctuations in the polysilicon market. The China Photovoltaic Industry Association (CPIA) has reported that price fluctuations for polysilicon reached 227%, 63%, and 280% in 2021, 2022, and 2023, respectively. These price swings have highlighted the urgent need for risk management tools in the sector, which is crucial for China’s clean energy goals.GFE has also introduced futures for industrial silicon and lithium carbonate, which are key materials in the renewable energy sector. These contracts, launched in December 2022 and July 2023, have shown strong market activity, with average daily trading volumes of CNY 13.7 billion and CNY 29.4 billion by November 2024.Polysilicon futures and options are expected to enhance the stability and efficiency of China’s solar value chain. They will help companies hedge against volatility, manage risks, and strengthen market confidence as the country expands its renewable energy capacity.