Residents pass by the Shanghai Futures Exchange, located in the Pudong District of East China's Shanghai Municipality, on August 1. Photo: IC

China on Monday launched trading of low-sulfur fuel futures on the Shanghai International Energy Exchange (INE), a further step toward the internationalization of the nation's futures market.

The first day of trading saw six contracts for monthly deliveries from January to June 2021, with a benchmark price of 2,368 yuan ($334.90) per ton. The contract LU2101 surged 12 percent at opening.

The launch of the futures will allow overseas investors to access the price signals, manage risks and advance steady operations in the sector.

As the third international future launched by the Shanghai INE following crude oil futures in 2018 and TSR 20 futures in 2019, low-sulfur fuel futures will also adopt yuan-denominated pricing, enhancing the international competitiveness of China's futures market.

Across the entire domestic futures market, low-sulfur fuel futures are the fifth futures to open to the overseas market after crude oil, iron ore, commodity chemical and textile raw material PTA, and TSR 20 futures.

"The futures market should promote a high-level opening-up to the outside world in a faster and deeper way, and should implement multi-path opening-up modes such as settlement price authorization and contract plug-ins," Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), said in an address at the launch ceremony on Monday.

Fang called for the flexible diversification of futures open to overseas investors.

Yuan-denominated crude oil futures were the first futures to open to overseas investors in the Chinese mainland. They started trading on March 26, 2018. 

China launched 15 new futures and option contracts last year and introduced three products this year, bringing the total currently traded on the market to 81, the Futures Daily reported. 

Low-sulfur oil is an important fuel for maritime transport. As China is the country with the largest cargo throughout at ports, low-sulfur fuel offers big opportunities, said Sun Xiansheng, secretary general of the International Energy Forum, during the launch ceremony.

The commodity's output in China in the next two years is expected to account for 30 percent of global consumption, according to Fu Xiangsheng, vice president of the China Petroleum and Chemical Industry Federation.

"International low-sulfur fuel futures can directly reflect the supply and demand of the fuel oil spot market and promote the formation of a reasonable pricing mechanism for the low-sulfur fuel industry," Fu noted.