(Yicai Global) Dec. 23 -- Guangzhou Futures Exchange, China’s fifth futures bourse, started trading yesterday and the first product on offer is the global debut of futures of industrial-grade silicon, used in a variety of products from solar panels to aluminum alloy.

Five contracts for industrial silicon, which will expire between August and December next year, were traded yesterday, Yicai Global learned. And trading of industrial silicon options, based these five contracts, started today.

The Guangzhou Futures Exchange is China’s first bourse with mixed ownership. Its shareholders include the four other futures markets, namely the Shanghai Futures Exchange, the China Financial Futures Exchange in Shanghai, the Zhengzhou Commodity Exchange in central Henan province and the Dalian Commodity Exchange in northeastern Liaoning province, as well as state-owned enterprises, private firms and overseas companies located in Guangdong.

Supply of industrial silicon is now outstripping demand and these futures provide a hedging tool for producers to help them secure profit, said Cheng Xiaoyong, deputy general manager at the research center of Guangzhou Finance Holdings Futures.

There is strong demand both in the upstream and downstream sections of the industrial chain to set prices and manage risks by using futures, said Feng Fan, an analyst at the metal sector with First Futures, a Tianjin-based future brokerage. Spot transactions of industrial silicon are mainly in the form of long-term contracts, which have greater fluctuations in pricing.

Industrial silicon is used to produce polycrystalline silicon, a key raw material in solar panels, as well as organosilicon, aluminum alloy and many other products. The photovoltaic sector is expected to account for 41 percent of China’s industrial silicon consumption by 2025, at over 1.9 million tons.

Editors: Tang Shihua, Kim Taylor