Steel Long Futures is launched by ICEX on 28th of August, today. As we all know that the steel market is going through a phase of enormous volatility in price and as the prices are currently at all time high, the contract would be a feast for hedgers and traders all time pleasure.
The Reliance ADAG-anchored Indian Commodity Exchange (ICEX) has positioned to instigate futures trading in steel long establishing from Tuesday.
This is a measure towards expanding its product horizon beyond diamond derivatives.
About the Steel Long Futures Contract
To begin with, three contracts expiring in November 2018, December 2018 and January 2019 will be offered for trading.
The trading lot size and delivery unit of the contract is 10 MT, with compulsory delivery at Ghaziabad the selected delivery location.
The price will be quoted ex-warehouse Ghaziabad (basis centre) exclusive of goods and services tax (GST) and other levies, but inclusive of basic customs duty and other related duties in case of imports.
Scope of the contract in Steel Industry
The futures trading in steel long will give the industry a more structured and healthier price detection platform.
This would give a national level benchmark price as a complete vindication for the participants; facilitating them to moderate their price risk.
Price Volatility in Steel industry
In the previous one year steel spot prices climbed by 40 per cent to reach peak in June 2018 and then dropped down by 10 per cent from its peak and are currently again on an upward trend.
According to Mr. Ponmudi, Market expert and Managing Director at Enrich Financial Group
The launch of steel long futures contract will fulfil the direct 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 observing to hedge their price exposure.
This is the apt time to having introduced the futures trading in Steel as India is currently positioned to become the second largest manufacturer of steel, producing approximately 100 million tonnes, in the midst of high price volatility of around 16 per cent annualised.
About 50 per cent of Indian steel production is used in a straight line in the construction sector, which is the second biggest contributor to Indian gross domestic product (GDP).
With the government shoving 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 required by the steel long value chain participants
Impact of the launch of futures trading in Steel
Domestic prices are on a rise.
Mandi prices have risen by Rs. 300/ ton since today.
Current prices are at Rs. 38100/ ton.
Domestic TMT demand is subdued.
Sponge Iron prices in central India are very high, backed up by export booking orders for pellets.