China Launches Log Futures to Stabilize Timber Prices and Boost Industry
China's log futures debuted on the Dalian Commodity Exchange (DCE) on November 13, 2024, with log options set to follow on November 19. This move aims to address price volatility, enhance transparency in log pricing, and offer the timber industry effective tools for risk management.
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Strong Market Start with Broad Participation
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On the first trading day, 99,000 lots were traded, with a turnover of RMB 6.84 billion and an open interest of 13,000 lots. Corporate clients contributed significantly, holding 18.8% of positions. Prices for all three listed contracts—LG2507, LG2509, and LG2511—dipped below the benchmark price of RMB 810 per cubic meter, reflecting weak real estate demand and seasonal pressures.
“Market behavior was rational, with prices aligning well with supply-demand dynamics,” said Chen Jiayi of CITIC Futures.
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Industry Welcomes Hedging Tools
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Frequent price fluctuations and heavy reliance on imports have long challenged China's timber industry. The introduction of log futures provides a critical hedging tool to stabilize costs and mitigate risks.
Leading companies like Zhejiang Materials Forest Products Co., Ltd. and Rizhao Guantong Wood Co., Ltd. participated actively, using futures to lock in raw material costs and protect profit margins.
“Futures offer stability amid volatile prices and shifting real estate demand, helping businesses manage long-term risks,” noted Jiang Kun, Chairman of Zhejiang Materials.
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Driving Industry Upgrades
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Beyond risk management, log futures are expected to strengthen China's role in global timber pricing and foster innovation in trade models.
“We aim to integrate futures into our procurement strategy, enhancing supply chain efficiency and competitiveness,” said Lin Zhangyi, Assistant General Manager of Zhejiang Kade Jiarui International Trading Co., Ltd.
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Building a Mature Market
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As participation grows, experts predict that log futures will serve as a benchmark for domestic and global timber markets. Financial institutions are also leveraging programs like "insurance + futures" to support upstream producers and forest farmers.
China's launch of log futures marks a milestone in stabilizing the timber industry, promising improved pricing mechanisms, stronger global influence, and enhanced resilience across the supply chain.
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