Hindustan Copper opens innings on MCX

In what could be considered as increasing corporate participation on the domestic commodity bourses, the public sector Hindustan Copper (HCL) has started hedging on the country's largest commodity exchange "� the Multi Commodity Exchange of India (MCX) "� through its broker Religare Commodities (RCL).

The first order was placed and executed on May 5. The company, however, does not intend to trade on any other platform, as of now.

"This is a learning experience, as we, the only vertically-integrated copper producer in the country, have started hedging on a futures platform," a company official said.

HCL, the 40,000-tonnes copper producer, is smaller compared with other primary copper producers including Sterlite and Hindalco and owns facilities from mining to beneficiation, smelting, refining and casting of refined copper into downstream saleable products.

Commodity futures markets are globally used by large companies to hedge their produce for risk mitigation. The significance of the move is that HCL is the first large metal producer in the country to use Indian commodities market for hedging as other large players hedge on the London Metal Exchange (LME).

According to trade sources, large metals producers such as Nalco, Balco, Jhagadia Copper and Sterlite are now considering hedging in commodity futures markets attracted by the increasing depth and volumes for metals futures on the MCX.

Similarly, metal processors and consumers such as Binani Zinc, Shyam Tele, Jindals and Lumax Auto are also set to take advantage of the hedging opportunity on the Indian commodity exchanges.

Analysts believe HCL's entry will raise confidence of other participants in the trading systems of commexes. Commodity exchanges strive to attract big corporates as they help easy participation of other stakeholders as well.

Earlier, the company said it was also looking for a consultant to hedge on the LME. The plan, however, has been put on hold due to the lack of infrastructure and trained manpower.

Without giving away the quantum of the hedge, the official said the company has set a minimum target, but it was too early to talk about its market strategy.

Copper is a non-deliverable contract on MCX, generating an average daily volume of 55,000-60,000 tonnes worth Rs 15,000 crore.

Through hedging on MCX, the company will get better price for its products. Conceding limitations of being a public sector player, the official said, "Although, we manage to sell our products, the hedging will bring strategic advantage to the company."