(Yicai Global) Nov. 27 -- China's first pulp futures started trading in Shanghai for the first time today, and plunged by the 10 percent limit.

The SP1906 contract for June delivery fell to CNY5,382 per metric ton from CNY5,980 on the Shanghai Futures Exchange, the country's leading commodity trading venue. The volume of turnover was 471,100.

The fibrous material is the 50th commodity to be offered in the country's futures market. Its price slump may have something to do with global macroeconomic trends, according to Ma Wensheng, president of Xinhu Futures. He told Yicai Global that the price of wood, which is used to make paper, has fallen sharply in the US.

But robust trading volume on the first day shows the market is relatively active, Ma added. Pulp futures will help the entire industry chain hedge against risk and will also be a relatively good investment and asset management target, he said.

The contracts are a hedging tools for producers, consumers and trading companies, helping them to stabilize output, guarantee profits and boost competitiveness, Fang Xinhai, vice chairman of the China Securities Regulatory Commission, said in a speech to launch the futures in Shanghai.

China is the most important growth market for the global paper industry, with both production and consumption of paper and cardboard accounting for about one quarter of the world's total. Pulp companies have strong risk-off demand for the commodity, an important raw material in the papermaking industry.

The Shanghai exchange is not far from becoming a benchmark for prices in China and even the Asia-Pacific region, Timothy Brown, vice president of the Pulp and Paper Products Council, said during the launch ceremony.

The CSRC's Fang also said the pulp futures aid objective reflection on supply and demand changes in the domestic and global markets, enhance the international influence of Chinese pulp and paper products, and guide the industry's steady and healthy development. Their listing is also conducive to the implementation of policies on forests and environment protection, he added.

Editor: Bivash Mukherjee