China's MEG price rises amid expectation of futures contract on the DCE

China's Dalian Commodity Exchange plans to accelerate the launch of a monoethylene glycol futures contract, together with some other commodities, the DCE's CEO Wang Fenghai said at the Institutional Commodity Derivatives Forum 2018 in Dalian last Thursday.

The news boosted market sentiment, pushing the CFR China MEG price up $37/mt from last Wednesday to $977/mt Friday and putting a stop to tepid MEG trading activity.

China's prompt domestic assessment jumped Yuan 430/mt over the same period at Yuan 8,150/mt. Founded in 1993, the DCE is one of the three futures exchanges approved by the State Council of China, together with Shanghai Futures Exchange and Zhengzhou Futures Exchange.

MEG futures are currently traded on the Huaxicun Commodity Contracts Exchange, which is run by private institutions.

"After the launch of the MEG futures market on DCE, the authorized commodity exchange, it will definitely attract more market participants and funds, with a more open market," a source said last Friday.

Market participants were buying MEG to build up inventories to prepare for the launch on DCE, traders said last Thursday and Friday.

This was reflected in the sudden drop of total open interest on the Huaxicun Commodity Contracts Exchange by almost 9% day on day to 351,062 lots last Friday, a trader said.

On the other hand, some market participants doubted this news alone was responsible for the jump in MEG prices, saying a surge of funds into the futures market last Friday had also contributed. The exact timeline remained uncertain for the official launch of MEG futures contract on DCE.

"DCE is currently under discussion with warehouses, which is a critical step towards the launch [of the MEG futures contract]. The announcement will be out in September or October," a source said.

Other market participants were not so optimistic, believing the launch would be only be feasible next year.