On the night of July 23, the Guangzhou Futures Exchange (GFEX) introduced sweeping adjustments to its futures market rules for key products including Industrial Silicon, Polysilicon, and Lithium Carbonate. The measures, which take effect from the settlement on July 25, include changes to price limits, margin requirements, transaction fees, and position limits—collectively referred to as a "four-pronged approach" to temper market overheating and prevent systemic risks.

Background and Rationale

The adjustments come amid strong bullish sentiment triggered by China's "anti-involution" policy, which aims to curb cutthroat price competition and phase out outdated capacity. Since early July, polysilicon's main futures contract surged over 50%, while other commodities like coking coal, glass, and iron ore also spiked. Analysts note that while policy-driven optimism has fueled sharp rallies, it has also amplified volatility and risk.

Market Analysis

GFEX stated that the new measures—higher transaction costs and stricter position limits—are designed to curb excessive speculation and restore market function. Analysts believe the move will help deflate bubbles and guide prices back toward fundamentals. However, elevated inventory levels and sentiment-driven rallies pose questions about the sustainability of recent gains.

In the short term, trading activity in affected contracts may decline, but experts view this as necessary for rational market behavior. Over the long run, “anti-involution” measures are expected to accelerate industry consolidation, particularly in sectors like polysilicon, steel, and photovoltaic materials. Huatai Securities forecasts that if polysilicon capacity utilization improves to 68%, supply-demand balance could emerge by Q4 2025, while steel prices may rebound under capacity swap and carbon-trading policies.

GFEX's decisive intervention signals regulators' readiness to act swiftly in response to market anomalies, ensuring that policy-driven momentum and self-regulatory mechanisms strike a balance—key to the healthy development of China's commodity markets.

Source: Changjiang Nonferrous Metals Network