The Shanghai International Energy Exchange completed its first cross-border delivery against TSR 20 futures on Aug 21, involving overseas standard warrants representing 600 metric tons of TSR 20 and marking the successful end-to-end operation of the cross-border delivery mechanism in China's futures market.

The Shanghai International Energy Exchange is a subsidiary of the Shanghai Futures Exchange. The first batch of overseas standard warrants was issued by Thai Hua Rubber Public Company Limited, an overseas designated delivery storage facility, and sold through the delivery process, with a total delivery value of 8.84 million yuan ($1.31 million).

The cargo covered by the transaction will be physically delivered at Laem Chabang Port in Thailand, according to the exchange.

Companies participating in the first cross-border delivery included PetroChina International (East China) Co Ltd, Intop International Singapore Pte Ltd, and Zheshang International Industrial Co Limited.

The cargo will take two paths in the physical market. Some will be shipped to China, cleared through customs, and transported to raw material warehouses operated by domestic tire manufacturers. The rest will be resold to overseas tire producers as offshore cargo and delivered directly to overseas end users.

Industry observers said the implementation of the cross-border delivery model for TSR 20 futures is a concrete step by China's futures market to better serve the real economy and an important measure to deepen opening-up in the futures sector.

They said overseas designated delivery storage facilities embed China's futures delivery network at key nodes of global commodity circulation, expand the scope and reach of delivery services, while attracting more international producers, traders, and other industry participants to China's futures market. This, they said, will further enhance the recognition and influence of "China prices" in global trade.

The mechanism also encourages more overseas companies to use China's futures prices in international trade, helping them manage operational risks while further strengthening the market's resource allocation and risk management functions.

An official with the Shanghai International Energy Exchange said the exchange will steadily expand the scope and improve the quality of cross-border delivery services while balancing domestic and international considerations, serving the real economy, and keeping risks under control.

The exchange will also further expand the uses of overseas standard warrants and broaden the coverage of its delivery network, with the aim of strengthening the futures market's ability to serve the real economy and supporting Shanghai's development as an international financial center.

Source: Shanghai Futures Exchange