Shanghai Futures Exchange, one of the country's three futures bourses, is considering introducing Liquefied Petroleum Gas (LPG) futures, an industry insider said.

 

If successful, it would be the first LPG futures product traded in Asia.

 

An official from Shanghai Futures Exchange, who requested to remain anonymity, disclosed the information at an oil and gas summit in Beijing, which ended yesterday.

 

But he said his exchange has just begun the preliminary research and studies into the new product.

 

Currently, Shanghai Futures Exchange has trading of oil fuel futures, which was introduced in 2004.

 

Oil fuel and LPG, industry analysts say, are the two most "market-oriented" refined oil products in China, which make their price vulnerable to changing market needs.

 

Domestic LPG consumption has reached 20 million tons a year, of which 6 million are imported.

 

The price fluctuations of LPG are even wider than that of oil fuels, which makes it imperative for importers and traders to find some risk-hedging tools, said Chen Wei, vice-president of Beijing Eagle Petro-Engineering Consulting Co Ltd.

 

"LPG futures could shoulder that function," said Chen, who has called for the LPG futures since 2002.

 

But industry participants say the launch of the LPG futures product would take some time to materialize.

 

"It would take some time for the industry players to be familiar with the new product, not to mention the approval procedure process, which is usually time-consuming," said Chen Hui, general manager of Guangzhou-based Zhongtian Futures Co Ltd.

 

"But the introduction of LPG futures will certainly be a boost to the futures market and enhance China's LPG price-setting weight in the international market," Chen said.

 

(China Daily February 23, 2006)