The Guangzhou Municipal Economic & Trade Commission announced that work on the much-anticipated Guangzhou South China Petrochemicals Exchange has now begun.

Located at Nansha, the Exchange's Phase I Project, with an investment of RMB 50 million, will open for business this year.

The Exchange will eventually be built into the largest petrochemicals exchange in Asia, offering "locally-based prices" through global procurement and local distribution and settlement.

According to Wen Shiheng, Director of the Logistics Department of the Guangzhou Municipal Economic & Trade Commission, the Exchange will mainly deal in fuel oil and may also trade in liquid chemicals.

Similar to the Guangdong Plastics Exchange, South China Grains Exchange and Guangzhou Metal Materials Exchange, the Guangzhou South China Petrochemicals Exchange will offer medium and long-term electronic spot trading in which spot commodities can be purchased now for delivery in six months.

At present, the influence on commodity prices of the three existing exchanges is becoming more apparent. The local commodity price authority indicates that prices in these three exchanges will be progressively adopted as the benchmark prices for basic raw materials such as plastics, steel and grains.

Industry insiders say that in a manner similar to Shanghai's superiority as a financial center, Guangzhou enjoys an industry advantages in fuel oil trading.

On one hand, Guangzhou has long been China's fuel oil wholesale center, accounting for 60% of China's total fuel oil imports and for 40-50% of total national oil demand, with consumption of over 15 million tonnes in 2004; and, on the other hand, all delivery centers for China's domestic fuel oil futures trading are located in the Pearl River Delta region.

Editor: Yan