Trends in commodity derivatives between January and April 2017

Published by: The WFE Research Team May 2017

This article looks at exchange traded commodities derivatives volumes traded in the first four months of 2017. In the January to April 2017 period, commodity derivatives volumes fell by 29% on the same period in 2016. Commodities futures, which account for 96% of the total volume traded, saw a 30% drop, January to April 2016. While all three regions experienced declines, the bulk of the drop is attributable to reduced volumes traded in the Asia-Pacific region. This is in sharp contrast to the trend observed historically (since 2013), when total commodities derivatives volumes traded were seen to be growing year on year for this period.

% change in volumes Jan to Apr 2017 vs Jan to Apr 2016
Americas -2.0%
Asia-Pacific -40.6%
EMEA -6.1%
Total -29%

The decline in volumes this year occurs against a backdrop of a global commodities rout which saw continued falls in prices in energy, non-precious metals, and precious metals as well as in the markets for agricultural commodities such as soya and corn.

In the Americas, there was a 2% and 1% decline in volumes of commodities options and futures contracts traded respectively, largely pulled down by the fall in volumes traded on CME Group and ICE futures USA, which account for over 90% of the total number of contracts traded in the region.

The performance of US markets occurs against a backdrop of US crude output climbing to the highest level since August 2015 (offsetting the effects of the production cuts implemented by other oil producing countries), Brent crude oil recording a six-month price low after dropping below the $50 per barrel mark, and forecasts of declining demand from China, the world’s second largest oil consumer. Agricultural commodities such as soya and corn also experienced falling prices due to better than expected regional and global harvests.

In the Asia-Pacific region, which accounted for a major share (58%) of commodities derivatives volumes traded during the January to April 2017 period, there were 11.7% and 40.6% declines in volumes of commodity options and futures traded respectively. The Chinese exchanges - namely the Dalian Commodity Exchange, the Shanghai Futures Exchange and the Zhengzhou Commodity Exchange, which account for over 92% of the commodities futures volumes in the region - recorded falls in total volume traded of 42.5%, 44% and 31.9% respectively from January to April 2017 versus the same period in 2016.

Commodities like iron ore, nickel, copper and coal plunged to new lows, fuelled by concerns of record supply, softening demand for construction materials from China (in April 2017 China recorded the lowest PMI in six months), and uncertainty regarding infrastructure expenditure plans in developed markets like the USA.

The EMEA region saw 4% and 6.1% declines in volumes of options and futures contracts traded January to April 2017 versus the same period in 2016. This was predominantly driven by falls in volumes traded on ICE futures Europe, Moscow Exchange and the London Metal Exchange, which together account for over 93% of the volume traded in the region. These overall falls were driven at least in part by declines in some of the most traded contracts on these exchanges, such as the Brent crude oil futures contracts and copper contracts.

Commodity Derivatives Volumes traded millions of contracts