Multi Commodity Exchange Ltd (MCX), one of the largest
commodity futures exchange in India has recently launched its Mild Steel
Ingot/Billet contract for December delivery.
To know more about the contract & it’s working, SteelMint spoke to Mr. Chittaranjan Rege, Vice President, Product Knowledge Management
Team at MCX. Following is the
edited excerpt of the conversation:
What is the objective of the contract?
The main objective of the contract is to provide an
excellent product for price risk management for all stakeholders in the value
chain and to setup a benchmark of long steel. We have kept compulsory delivery
mechanism for this contract and made Raipur as the delivery center for the
benefit of stakeholders.
Chhattisgarh is one of the largest steel producing
states. So, do you think selecting Raipur as the delivery center will help your
contract?
It has been selected after making a complete analysis &
study. We have not selected Raipur just because it is located in one the
largest producing states. We had options of consumption centers like Mandi
Gobindgarh, Ghaziabad.
In Indian context, Chhattisgarh (and adjoining areas) region
being mineral rich, supplies to rest of India. The viability of imports works
as competition to these supplies. We believe that Raipur is best suited to
offer right benchmark for India reference price. Rest of India would anyways
find it easier to work on incremental transportation cost basis.
And, in the region Raipur is best suited in terms of the
economic viability, infrastructure facilities, acceptability and it is also
well connected to other major steel hubs like Odisha, Durgapur, Andhra Pradesh
& Maharashtra.
The Contract specifies that the commodity traded should
confirm the BIS norms. Whereas, as of now there are hardly any manufacturers
producing the BIS grade material. So, how can we see the volumes then?
The implementation was due for long period. I think people
will adapt to changes, may be slowly. We go by the norms set by the Government.
Our efforts will go in the direction of helping people to understand the price
risk. We are undertaking various awareness programs for informed
participation.
How has been the response so far and do you see big
steel manufacturers participating in this contract?
Response has been good so far. We have launched the contract
after doing a lot of groundwork. So, we have a ready audience for the contract.
We are working towards an inclusive growth of the contract and expect that more
stakeholders including SMEs as well as large steel manufacturers will join the
stream and contribute to the success of the contract.
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