CMST Development Created Aluminum Logistics Center in North China



CMST Development Created Aluminum Logistics Center in North China

On April 25, at the 2016 Luoyang Aluminum Futures Delivery Warehouse Promotion Meeting & Inauguration Ceremony for Aluminum Futures Designated Delivery Warehouse of CMST Development Co., Ltd Luoyang Branch, Shen Zhongming, Director Assistant of the Delivery Department of Shanghai Futures Exchange (SHFE), read out the “Reply on Approving CMST Development Co., Ltd to become Designated Delivery Warehouse for Aluminum Futures of Shanghai Futures Exchange”, the “Reply” approved CMST Development Co., Ltd Luoyang Branch Warehouse to become designated delivery warehouse for aluminum futures of Shanghai Futures Exchange, the rated warehouse capacity is 10000 tonnes of aluminum, regional discount is 120 yuan, and it can begin standard warehouse receipt generation business for aluminum futures since February 16, 2017.

CMST Development Co., Ltd Luoyang Branch Warehouse is not the only aluminum delivery warehouse being granted approval this year, in Zhengzhou and Tianjin, CMST Development Co., Ltd also respectively obtained approval for Zhengzhou Logistics Center Warehouse and Tianjin Nancang Branch Warehouse. On March 1, Shanghai Futures Exchange published reply notice on newly setting up eight aluminum futures delivery warehouses in Henan, Shandong, Chongqing and Tianjin. Wherein, 3 are in Henan, which provides enough evidence in relation to the importance that Shanghai Futures Exchange attaches to Henan aluminum industry.

Nonferrous metals industry is one of six advantageous industries receiving focused support for development from Henan, in the recent several years, the total profit and tax of nonferrous metals industry in Henan Province maintained top position for consecutive years. Both aluminum output and profit tax account for about 80% of the total aggregate of Henan Province’s nonferrous metals industry; on the other hand, as Henan Province’s important aluminum industry city, Luoyang accounts for about 1/3 of Henan’s aluminum output, its annual sales income is about 160 billion yuan, aluminum industry plays dominant role for regional economic development in Luoyang and Henan, any violent fluctuation in the aluminum industry will invariably affect stable development of Henan’s local economy.

In recent years, production and consumption venues of China’s aluminum industry are progressively migrating from coastal regions in Southeast China to hinterland and North China. According to survey report delivered by Shanghai Futures Exchange, currently China’s electrolytic aluminum production is mainly concentrated in Northwest China (Xinjiang, Inner Mongolia, Qinghai, Gansu) regions, and Southwest China (Sichuan, Guangxi, and Yunnan) regions as well as Central Plain (Henan, Shanxi) plus the coastal province of Shandong Province, whereas main consumption regions of electrolytic aluminum are migrating and expanding from Guangdong, Jiangsu and Zhejiang to Chonqing City, Henan Province and Shandong, Beijng, Tianjin and Hebei regions, aluminum product processing and consumption in emerging consumption regions have developed considerable scale, besides the consumption volume is huge.

Before eight aluminum futures delivery warehouses received approval this year, the aluminum futures delivery warehouses supporting the Shanghai Futures Exchange were all concentrated in East China and South China regions, which are relatively far away from Central China and West China regions such as Henan, although some aluminum manufacturers and processing enterprises with limited scale have more or less developed contact with futures delivery, few of them actually took part, the main reason is long distance, little awareness, and inadequate experience, therefore most of them failed to enter operation step.

As aluminum processing enterprises relocated and developed toward Central China and West China, the geographical contradiction of these enterprises taking part in futures delivery is increasingly emerging. Take Henan as an example, if aluminum processing enterprises in surrounding areas of Henan want to obtain aluminum ingots through futures delivery, they need to pick up goods at delivery warehouse located in East China and South China before shipping them back. This increases enterprises’ logistics cost, and prolongs the purchase time for delivering aluminum ingots, and inadvertently forces enterprises to assume the risks of capital usage and price fluctuation before putting delivered aluminum ingots to production, and creates adverse impact on production and operation by enterprises.

Located in Western Henan region, Luoyang is one of the key railway hubs on the Lanzhou-Lianyungang Railway line, a key node in the new Asia-Euro Continental Bridge Economic Corridor, convenient transport access advantages provide excellent material foundation for aluminum futures delivery business; meanwhile, the setup of aluminum futures delivery warehouse will further consolidate Luoyang’s economic standing and transport advantages.

As Henan’s aluminum trade center, Gongyi region attracts numerous enterprises to go there for trading, Luoyang’s aluminum processing enterprises generally go to Gongyi to pick up delivery, currently Gongyi’s local aluminum trading price benchmark is 80 yuan discount for Yangtze River spot price, whereas the Shanghai Futures Exchange sets up discount criterion for delivery warehouse at 120 yuan, therefore in the future enterprises will have big cost advantage in making Luoyang delivery, this will increase Luoyang’s investment appeal for aluminum processing enterprises.

According to market insiders who attended the meeting, futures market’s risk management function is very necessary for big provinces of aluminum industry like Henan, it not only can guide enterprises to better utilize “price discovery” and “risk avoidance” mechanism of the futures market, but also can prompt enterprises to scientifically draft production plan, effectively cope with price fluctuation, stabilize the development of electrolytic aluminum industry. The move by CMST Development Co., Ltd Luoyang Branch to set up aluminum futures delivery warehouse will facilitate aluminum manufacturers in Henan region to carry out hedge through futures contract, so as to attract more enterprises to take part in futures trading.

Regional cost advantage attracts downstream and upstream enterprises. CMST Development Co., Ltd Luoyang Branch Aluminum Futures Delivery Warehouse is 124 km from Zhengzhou in the east, 144 km from Sanmenxia in the west, 123 km from Jiaozuo in the north, located in the middle of the Zhengzhou-Luoyang Industrial Corridor Aluminum Industrial Concentration Area, the inauguration of the delivery warehouse will effectively alleviate the space and time contradiction of aluminum manufacturers and processing enterprises in Henan surrounding areas to participate in futures delivery, so as to accomplish nearby delivery, effectively lowers delivery’s logistics cost and capital use, and reduces enterprise risk in taking part in futures delivery, this holds significant meaning for the current aluminum manufacturers trapped in fierce competition and low profit rate in their effort to expand profit-earning space, and improve market competitiveness. It has been learned that, currently not only Luoyang local aluminum enterprises eagerly want to do business at CMST Development Co., Ltd Luoyang Branch Delivery Warehouse, aluminum enterprises in Northwestern provinces and regions including Qinghai also hope their company’s goods can enter Luoyang delivery warehouse as soon as possible.

Cost advantage is not the only criterion for aluminum enterprise to enter delivery warehouse for business, the self strength of CMST Development Co., Ltd also plays crucial role in gathering popularity.

According to published data, CMST Development Co., Ltd is the biggest delivery warehouse operator at Shanghai Futures Exchange, its delivery varieties include copper, aluminum, lead, zinc, nickel, silver, rubber, deformed steel bar, wire, and hot rolled coils etc. CMST Development Co., Ltd Luoyang Branch is a branch of CMST Development Co., Ltd in Luoyang. After nearly 50 years of development, CMST Development Co., Ltd Luoyang Branch has become an integrated comprehensive logistics service provider relying on bulk commodity logistics, public bonded warehouse and export supervised warehouse, offering warehousing and transport, processing and delivery, pledge financing, spot trading, material distribution and international freight forwarding etc, making it the most powerful logistics enterprise in Luoyang and even Western Henan region.

Wang Mingshui, General Manager of CMST Development Co., Ltd Luoyang Branch, said CMST Development Co., Ltd Luoyang Branch has 93000 sqm land area, 20000 sq warehouse area, 50000 sqm cargo yard, 883 meters of dedicated railway line, and 6 large gantry cranes, whose maximum lifting ability is 40 tonnes, 9 ground cranes, forklifts and short pallet vehicles, 200,000 tonnes of warehouse capacity, with annual turnover volume of 1,300,000 tonnes. The dedicated railway line is linked to Lanzhou-Lianyungang Railway. It boasts standard management and neat cargo stacks, capable of meeting the requirements of aluminum products for storage upon arrival, unloading, and transit. As a node of logistics network for the listed company, it is superior to other logistics enterprises in terms of awareness and ability of overall logistics operation. In particular, with integrated service by using software & hardware facility and functions, it is able to provide aluminum products with whole-course integrated logistics service covering loading/unloading and warehousing, transport distribution, international freight forwarding etc.

Shen Zhongming pointed out, CMST Development Co., Ltd Luoyang Branch boasts regional advantage in geographical location, superior facility and equipment, outstanding management team and system, healthy financial condition and risk resistance ability, the company enjoys strong advantages in business. Currently the processing and consumption volume of Henan aluminum industry possess certain scale. The setup of delivery warehouse in Henan region will make the aluminum futures delivery deployment of Shanghai Futures Exchange more rational, it is recommended that downstream and upstream aluminum enterprises have more participation in futures market, and better bring out price discovery function of the futures market.

Targeting at the company’s future development directions, Wang Mingshui pointed out, the 800 mu logistics park zone of CMST Development Co., Ltd Luoyang Branch now under construction takes root in Luoyang, serves Western Henan, and radiates toward the central plain economic region, intending to construct function concentration zone of modern logistics service industry featuring ‘highway-railway combined transport’. Wherein, the total floor space of comprehensive logistic division is 352,000 sqm, including 200,000 sqm of container and bulk goods stacking yard, 100,000 sqm of warehouse, 10000 sqm of logistics processing workshop, and 10000 sqm of business lobby and office premise, scheduled to introduce 3.6 km of three exclusive railway lines, complete with supporting gantry crane, truck crane, and forklift logistics equipment, which will further consolidate futures delivery center and bonded logistics center, and lay down solid hardware foundation for future development of the company’s businesses.

The inauguration and setup of CMST Development Co., Ltd Luoyang Branch Aluminum Futures Delivery Warehouse will enable aluminum enterprises in Henan’s surrounding areas to enjoy the benefits of favorable position, and make trading by SME enterprises in the form of futures delivery more widespread, the awareness to take part in futures delivery will be heightened, fulfill flexible operation in multiple forms such as hedge, Pledge by Warehouse Receipts, and Exchange for Physicals, so as to avoid risk, minimize the impact on enterprise stable operation caused by price fluctuation, and better promote transition and upgrading of the electrolytic aluminum industry.