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National Commodity & Derivatives Exchange Ltd (NCDEX) today said it has re-launched its steel long contract based on the BIS 2830 grade.
NCDEX is the only exchange which offered steel long futures, which had become a benchmark price reference for the long products segment in the Indian steel industry.
The earlier contract was discontinued after the BIS norms were mandated by the government in September 2012, the exchange said in a statement.
The objective is to migrate the entire steel sector towards implementation of the BIS norms and thereby provide quality steel products to consumers.
"Steel is the second most traded physical commodity after energy. In fact, as consumers of steel products, it is an integral part of our daily lives. With the relaunch of the NCDEX steel long contract, we expect it to add tremendous value to the existing steel business entities and stakeholders," NCDEX MD in-charge Samir Shah said.
The new steel long contract launched by the exchange is based on BIS 2830 grade.
With the production of billets and ingots expected to converge to the BIS 2830 grade in the main and secondary steel sectors, the contract will aid the price discovery and facilitate hedging amongst the entire steel production chain.
It will also facilitate the migration of the secondary steel sector towards early adoption and production of BIS 2830 grade.
Deliverable at seven key steel production/consumption centres across India, the contract would help the producers and consumers to lock into a forward price with the added benefit of the counter party risk mitigation provided by the Exchange. NCDEX would also facilitate the physical delivery of steel at exchange approved warehouses, the release said.
Way back in March 2005, NCDEX was first in the world to launch futures contract in steel. However, the contract had to be discontinued after the government's body Bureau of Indian Standards (BIS) mandated steel quality norms last year.
"We have revised our steel long contract with the BIS specifications. We are launching now total four contracts December, January, February and March," NCDEX Managing Director In-charge Samir Shah said at the launch ceremony.
As per the NCDEX' new steel contract, futures trading is allowed in steel long having BIS 2830 grade quality. The delivery is compulsory from seven centres -- Mandi Gobindgag, Ghaiziabad, Mumbai, Raipur, Hyderabad, Jaipur and Kolkata, he
The contract provides flexibility for settlement of the trade either through direct delivery or from the approved warehouses of the bourse, he said, adding that the prices under the contract would be discovered locally.
Currently, the country manufactures 36 million tonnes of steel long. The exchange expects trading of atleast one per cent of the total output on its platform by next year, thereby improving its total trading volumes.
Unvieling the new contract, JSW Steel Ltd Joint Managing Director and Group CFO Seshagiri Rao said: "The steel futures introduced by NCDEX will help all stakeholders in the industry. We will be happy to use this platform for price discovery and hedging."
There is a huge scope for industry to benefit from this futures trading platform as the government aims to raise the country's steel production to 300 million tonnes in the years come. Presently, India produces 80-90 million tonnes, against the capacity of 100 million tonnes, he added.
Echoing views, JSPL Steel Deputy Managing Director and CEO V R Sharma said that such a platform was very essential for the industry for discovering the right price.
NCDEX is the second biggest commodity bourse in the country after MCX. It mainly offers futures trading in agricultural commodities. It is now expanding in other non-agricultural commodities.
