With the launch of steel futures, Indian Commodity Exchange Limited (ICEX) is widening its product offerings to its existing product portfolio of diamond derivatives.
The availability of futures trading in steel long, will provide the industry with a more structured and healthy price discovery platform as well as a national level benchmark price as a ready reference for the participants, enabling them to mitigate their price risk.
Initially, three contracts expiring in November 2018, December 2018 and January 2019 will be available for trading. The trading lot size and delivery unit of the contract is 10 MT, with compulsory delivery at Ghaziabad the designated delivery location. The price will be quoted ex-warehouse Ghaziabad (basis centre) exclusive of GST and other levies, but inclusive of basic customs duty and other related duties in case of imports.
Elaborating about the launch, Sanjit Prasad, MD & CEO, ICEX, said, “Steel industry is exposed to tremendous price volatility. In the last 1-year steel spot prices rose by 40% to reach peak in June 2018 and then came down by 10% from its peak and are currently again on an upward trend. The launch of steel long futures contract will serve the immediate need of market participants. Post GST, the commodity shall see participation from the stakeholders including, traders, importers, exporters, manufacturers and infrastructure industry among others, who are looking to hedge their price exposure.”
With India well poised to become the 2nd largest manufacturer of steel, producing approximately 100 million MT, amidst high price volatility of around 16% annualized, ICEX steel futures could not have come at such a right time. Around 50% of Indian steel production is used directly in the construction sector, which is the second biggest contributor to Indian GDP. With the Government pushing infrastructure development such as road construction, laying of railway lines, construction of new airports, etc., a strong need for a domestic benchmark steel price is being felt by the Steel Long value chain participants.
