The Guangzhou Futures Exchange (GFEX) said on Tuesday it plans to launch its first platinum and palladium futures contracts in China, the world’s second-largest economy, to offer a domestic price-hedging mechanism.
The GFEX will be the first exchange to allow delivery against its contracts of platinum and palladium in a form used by the main consumers, including automakers and other industrial sectors, and the contracts may also support platinum investment demand in China.
“Our exchange fills a gap in the Chinese market, providing the mechanisms to discover the domestic prices of platinum and palladium in China and help businesses hedge price risk,” Chen Xuanchen, GFEX’s R&D lead for platinum and palladium futures, was quoted as saying in the World Platinum Investment Council (WPIC) statement.
GFEX’s contracts will enhance the stability and efficiency of the Chinese platinum group metals (PGMs) market, said Trevor Raymond, chief executive at the WPIC, whose members are major Western platinum producers.
The GFEX, which was established to support China’s green transition in 2021, started with silicon futures in 2022 and then launched lithium futures in 2023.
The PGMs contracts will be settled monthly, while CME Group’s NYMEX offers quarterly contracts. As usual, participants will be able to opt to offset the position at GFEX or to take delivery of the metals if they hold contracts to expiry.
However, if delivery is required, platinum and palladium in the form of both ingots and sponge – pure metal in powder form – will be accepted against GFEX’s contracts. Currently, no other exchange in the world allows delivery of sponge.
“The ability to take delivery of sponge could be transformative for industrial users of PGMs, as well as automakers, as this is the main form typically used for their manufacturing purposes,” the WPIC said.
The GFEX’s new futures will also allow platinum jewellery and investment product fabricators to hedge price risk, and this in its turn, may reduce the premium they charge clients for platinum products and the discount on buyback, according to the WPIC statement.
