Shanghai steps up futures–spot linkage in non-ferrous metals markets

by JIANG Xi

Shanghai is seeking to strengthen its position in global non-ferrous metals markets by tightening links between Futures and spot trading, as China looks to reduce reliance on offshore pricing benchmarks amid rising geopolitical and trade uncertainty.

At a briefing on Jan 20, the Shanghai Municipal Financial Regulatory Bureau, together with the Shanghai futures Exchange and other market institutions, gave details of a new action plan to upgrade the city's non-ferrous metals market. The plan, released in late December, sets out 18 measures to improve market connectivity and expand international participation.

Officials said the measures are intended to improve coordination across futures, spot and derivatives markets and help improve price discovery for key industrial metals.

Non-ferrous metals such as copper, aluminum and nickel have gained strategic importance as global supply chains are reshaped by geopolitical tensions, trade frictions and rapid growth in sectors including electric vehicles, aerospace and semiconductors. Analysts say pricing and risk management have become increasingly important to industrial competitiveness.

ZENG Gang, deputy director of the National Institution for finance and Development, said the plan focuses on closer futures–spot integration alongside institutional opening, with the aim of improving pricing, risk management and supply-chain coordination in the non-ferrous metals market.

International benchmark pricing for many non-ferrous metals remains dominated by offshore venues such as the London Metal Exchange, although China's scale as both a producer and consumer has increased the relevance of its domestic markets.

China is the world's largest producer and consumer of several non-ferrous metals, with output of aluminum, copper, lead and zinc among the highest globally. The Yangtze River Delta hosts a highly integrated supply chain linking upstream mining with smelting, processing and downstream manufacturing.

"Because production and consumption are so concentrated in China, price movements in Shanghai tend to track conditions in the physical economy more closely," said Neal Qiu, a principal at Roland Berger. He added that demand from sectors such as AI data centers has risen sharply, with copper widely used in cooling systems, connectors and cabling.

Shanghai's push builds on an established market structure. The city hosts futures, spot and over-the-counter derivatives markets that already play a central role in China's metals trading.

The Shanghai Futures Exchange lists 11 non-ferrous metals futures contracts and 10 options contracts, including copper and aluminum, some of which market participants say have begun to influence regional pricing.

Shanghai clearing House has provided central clearing services for commodity swaps and forwards since 2013, covering several non-ferrous metals. Spot trading platforms have also expanded, supported by broader municipal efforts to upgrade commodity trading and logistics services between 2025 and 2027.

LIN Boqiang, Dean of China Institute for Studies in Energy Policy, Xiamen University, said the plan is broadly supportive for companies along the supply chain, adding that improved pricing transparency and risk-management tools could help lower hedging costs over time.

Analysts cautioned that the impact is likely to be uneven in the near term. Companies with stronger risk-management capabilities and access to upstream resources are expected to benefit earlier, while firms reliant on speculative trading or with limited hedging capacity may face pressure as pricing becomes more transparent.

Over the longer term, supporters argue that deeper liquidity and wider participation could improve price reliability and strengthen the resilience of China's non-ferrous metals industry.

"Global commodity finance and trade systems are undergoing change," Qiu said.