Overcapacity and weak demand gloom futures trading

2012-12-04 05:42:21 GMT2012-12-04 13:42:21(Beijing Time)  SINA.com

Trading of the world's first glass futures contracts in China tumbled on the first day amid concerns of overcapacity and weak demand.

The most active May contract ended 7.18 percent lower at 1,318 yuan (US$211.4) per ton on the Zhengzhou Commodity Exchange in Henan Province. The contract touched an intraday low of 1,314 yuan.

Analysts said Chinese glass makers are struggling with high inventories as the government has tightened control on the property market. They added that lower spot prices indicate the futures contracts could fall further.

"As winter approaches, glass inventories began rising again after two months of a short-lived recovery (in September and October) in the construction market," said Zhao Xue, analyst at commodity data provider 100ppi.com.

The construction industry is the main consumer of glass, which is also used by automakers, solar panel companies and home appliance makers.

Glass is the second futures contract launched in China this year, after silver on the Shanghai Futures Exchange. Most other commodities futures rose yesterday in China.

The Zhengzhou exchange said it expects the glass futures contracts to create an industry benchmark price and to provide manufacturers with a financial tool to hedge against price risks.

China is the world's largest maker of glass.

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