On July 29, 2024, the Shanghai Futures Exchange issued an announcement to revise the "Shanghai Futures Exchange Rebar Futures Contract", "Shanghai Futures Exchange Wire Rod Futures Contract" and "Shanghai Futures Exchange Delivery Rules", revising the quality and delivery grade of rebar futures from "GB/T 1499.2-2018" to "GB 1499.2-2024". The quality and grade of wire rod futures are revised from "GB/T 1499.1-2017" to "GB 1499.1-2024".

In order to comply with the mandatory implementation of the new national standard.

On June 25, 2024, the State Administration for Market Regulation and the Standardization Administration of the People's Republic of China issued the "Announcement on Approving the Issuance of 18 Mandatory National Standards such as Steel for Reinforced Concrete Part 1: Hot-Rolled Round Steel Bars" (No. 12 of 2024), clarifying that GB 1499.2-2024 "Steel for Reinforced Concrete - Part 2: Hot-rolled Ribbed Steel Reinforcement" replaces GB/T 1499.2-2018 "Steel for Reinforced Concrete - Part 2: Hot-rolled ribbed steel bars"; GB 1499.1-2024 "Steel for reinforced concrete – Part 1: Hot-rolled round steel bars" replaces GB/T 1499.1-2017 "Steel for reinforced concrete – Part 1: Hot-rolled round steel bars", and will be implemented on September 25, 2024. According to the relevant provisions of the Standardization Law of the People's Republic of China and the Measures for the Administration of National Standards, products and services that do not meet mandatory national standards shall not be produced, sold, imported or provided.

According to relevant industry insiders, rebar is mainly used as stress bars, etc., and wire rod is mainly used as stirrups, reinforcement, longitudinal stress bars, etc., which play a key role in ensuring building quality and safety. In order to give full play to the guiding and promoting role of standards on product quality, the Ministry of Industry and Information Technology and the State Administration for Market Supervision and Administration will revise the product standards of hot-rolled round steel bars and hot-rolled ribbed steel bars from recommended to mandatory, and the advanced, effective and applicability of the standards will be fully applied in the industry, so as to better promote production enterprises to improve their processes, strictly control the quality of factory products, further reduce the substandard products entering the market, better ensure the quality of engineering raw materials, and promote the sustainable development of China's construction industry. It is understood that Pinxin Iron and Steel, Jingye Iron and Steel, Zhongtian Iron and Steel, Jiangsu Yonggang, Nanjing Iron and Steel and other production enterprises have successively issued announcements, planning to switch to the new national standard from late July to mid-August.

The reporter saw that on July 29, the previous period issued a number of announcements, agreeing to Baowu Group Echeng Iron and Steel Co., Ltd. and other 8 rebar registered enterprises to change product labels and surface signs, agreeing to Jiangsu Yonggang Group Co., Ltd. to change the wire rod futures product label, agreeing to Wuhan Iron and Steel Group Kunming Iron and Steel Co., Ltd. "Kungang" brand rebar registration, agreeing to Shougang Changzhi Iron and Steel Co., Ltd. "Shangdang" brand rebar registration, and agreeing to Jiangsu Xugang Iron and Steel Group Co., Ltd. "Xugang" brand rebar registration. The implementation standards for the above rebar products (grades: HRB400E) are all GB 1499.2-2024; The implementation standard for wire rod products is GB 1499.1-2024.

The market is switching in an orderly manner

The above-mentioned people pointed out that compared with the new version of the mandatory national standard, the old version of the recommended national standard, the chemical composition requirements of rebar and wire rod have not changed, in addition to the testing requirements, the main difference between the old and new national standards is reflected in the weight allowable deviation tightened, the impact on production costs is limited. At present, the spot market price is lower, mainly reflecting the market's judgment on the old version of the recommended national standard goods can be used until September 24.

According to the relevant provisions of the Standardization Law of the People's Republic of China and the Measures for the Administration of National Standards, products and services that do not meet mandatory national standards shall not be produced, sold, imported or provided. As the switch date approaches, there is uncertainty about the change of spot prices, and all parties in the market should prepare in advance and take timely measures to jointly maintain market order.

From the perspective of the futures market, since the release of the new mandatory national standard on June 25, the price difference between the September contract and the October contract of rebar futures has gradually widened, and is higher than the level of the same period in previous years, and the overall trend of change is synchronized with the spot price, reflecting the expectations of market participants for the conversion of the new version of the mandatory national standard and the old version of the recommended national standard.

What is the impact on the standard warehouse receipt business?

The relevant person in charge of the Shanghai Futures Exchange said that the Shanghai Futures Exchange conscientiously studied and implemented the spirit of the Third Plenary Session of the 20th Central Committee of the Communist Party of China, led the optimization and upgrading of traditional industries with the improvement of national standards, conformed to the development of the spot industry, adhered to the principles of marketization and rule of law, and carried out the revision of contracts and related rules on the basis of ensuring the smooth operation of the market, so as to serve the high-quality development of the steel industry.

According to the notice, from July 29, 2024, products produced in accordance with GB 1499.2-2024 and GB 1499.1-2024 are allowed to register standard warehouse receipts. From August 19, 2024 (inclusive), products manufactured in accordance with GB/T 1499.2-2018 and GB/T 1499.1-2017 are not eligible for registration of standard warehouse receipts. After the market closes on September 24, the standard warehouse receipts registered for products produced in accordance with GB/T 1499.2-2018 and GB/T 1499.1-2017 will be cancelled by the exchange, and the standard warehouse receipts that have not been unpledged will be unpledged by the exchange.

The first is about the cancellation of the old version of the recommended national standard registration warehouse receipt, according to Article 25 of the Standardization Law of the People's Republic of China, products and services that do not meet the mandatory standards shall not be produced, sold, imported or provided; Article 36 of the Measures for the Administration of National Standards Mandatory national standards must be implemented. Products and services that do not meet mandatory national standards shall not be produced, sold, imported or provided. The goods produced in accordance with the old version of the recommended national standard can no longer be produced, sold, imported or provided on September 25, therefore, in accordance with the requirements of national laws and regulations, the exchange will notify the cancellation of the old version of the recommended national standard registration warehouse receipt after the close of trading on September 24.

The second is about allowing the registration of warehouse receipts for goods produced in accordance with the new national standard from the date of issuance of the notice. The new mandatory national standard was released on June 25, and according to Article 39 of the Measures for the Administration of Mandatory National Standards, enterprises can choose to implement the new mandatory national standard before the implementation of the mandatory national standard after the issuance of the mandatory national standard. On the basis of a full understanding of the market situation, the exchange allows the registration of warehouse receipts for the production of goods in accordance with the new national standard, which on the one hand meets the requirements of relevant national laws and regulations, and on the other hand, it is basically consistent with the progress of the implementation of the new national standard for the brand manufacturers registered on the exchange, which can effectively ensure sufficient delivery resources.

Another is that from August 19, 2024 (inclusive), it is not allowed to register and generate warehouse receipts for goods produced in accordance with the old version of the recommended national standard. According to the relevant rules and regulations of the exchange, August 19 is the second delivery day of the August contract of rebar and wire rod futures, and the warehouse receipts for August delivery have been determined and allocated, and the August delivery has been basically completed. According to the relevant announcement requirements of the Ministry of Industry and Information Technology and the State Administration for Market Regulation, the new version of the mandatory national standard will be implemented on September 25. From August 19 to September 24, there are only about 25 trading days left, and if the old version of the recommended national standard goods is allowed to register and generate warehouse receipts, it is easy to affect the delivery willingness of customers in September contracts, which may exacerbate market volatility.

All parties in the market need to take timely measures to respond.

Relevant market participants said that during the conversion period of the new and old national standards in the spot market, it is recommended that the exchange strengthen supervision, strengthen the monitoring of market operation, and introduce necessary measures to ensure the smooth operation of the futures market. All parties in the market shall abide by the relevant national laws and regulations, pay attention to risk prevention in accordance with the requirements of the rules and regulations of the exchange, and jointly ensure the smooth operation of the market.

For customers who are involved in the conversion of the old and new national standards, they should fully assess the market liquidity, delivery willingness, and the way to deal with the goods after delivery in accordance with the relevant notification requirements of the State Administration for Market Regulation and the Standardization Administration of the People's Republic of China, as well as the notice of the exchange, so as to do a good job in position management and timely release of the pledge. Member units should strengthen customer tracking and risk warning. The delivery warehouse should strengthen management and respond to it in accordance with relevant market laws and regulations.

The reporter saw that on July 29, the Shanghai Exchange issued a number of announcements on adjusting the trading margin ratio and price limit of some rebar futures contracts, as well as adjusting the transaction fees of rebar futures and other related contracts.

According to the announcement, from the closing settlement on July 31, 2024 (Wednesday), the price limit of the rebar RB2408 contract will be adjusted to 7%, the hedging transaction margin ratio will be 15%, and the speculative transaction margin ratio will be 15%; The price limit of the rebar RB2409 contract is adjusted to 7%, the margin ratio for hedging transactions is 10%, and the margin ratio for speculative transactions is 10%; The price limit of the rebar RB2410 contract is adjusted to 6%, the margin ratio of hedging transactions is adjusted to 7%, and the margin ratio of speculative transactions is adjusted to 8%.

Starting from the trading on July 31, 2024 (i.e., the evening trading on July 30), the intraday closing transaction fee of rebar futures RB2408, RB2409 and RB2410 contracts will be adjusted to 2/10,000 of the transaction amount, and the intraday closing and hedging transaction fee will be adjusted to 1/10,000 of the transaction amount. The transaction fee of wire rod futures WR2408, WR2409 and WR2410 contracts will be adjusted to 2/10,000 of the transaction amount, and the transaction fee of the intraday hedging will be adjusted to 1/10,000 of the transaction amount.

The relevant person in charge of the Shanghai Futures Exchange said that the Shanghai Futures Exchange will take necessary risk control measures in trading, settlement, delivery and other links according to the operation of the market, and at the same time strengthen front-line supervision, crack down on illegal trading behaviors such as disrupting market order, maintain the smooth operation of the market, and promote the smooth transition of the revision of national standards for rebar and wire rod.