One remarkable aspect about the performance of the Indian steel industry during the lockdown was its swelling exports volumes that were 3-4 MnT in the first quarter of CY20 and would certainly be around 4 MnT till around August-September, said Rajeev Vyas, Vice-President, Steel Users Federation of India (SUFI), on the occasion of the pre-launch discussion about Steel Futures Exchange – an endeavour jointly triggered by BSE and SUFI.
Hedging Tool
While exporters and other stakeholders in India had their sights fixed on possible demand upsurge/slide in China and on the China Futures Exchange, the need for an Indian steel futures exchange was keenly felt because of the sheer demand for a “hedging tool” for mitigating price risks as well as the need for steel mills, OEMs and trade segments to take a clue from China as to how to create buffers to ward off financial calamities.
Billets Contracts Specifications
The contract specifications for billets futures that were discussed, with an assurance of inclusion of other downstream products such HRC and HR plates, include quality specifications for BIS 2830:2012 standard for carbon steel Grade A with designation C15, C18, or above for 100×100 MM or 120/130/150 MM or above billets of length 6 MTR/150 MM with a price quote of ex-Raipur as the delivery centre.
Of course, other delivery centres will be included in due course to facilitate easing of doing business, assured Nikunj Turakhia, President, SUFI.
The contract specifications include an extreme loss margin of 1% with a “staggered delivery period” in sync with the ICCL mechanism of staggered delivery allocation where the buyer can’t refute delivery.
R. Parekh, SUFI advisory board member and ex-President, Bombay Metal Exchange, said that rather than being a speculative platform the exchange would facilitate trade by using the platform for hedging.
MCX index for non-ferrous metals, set up in 2004, demostrates the success of such platforms with trading volumes of copper and aluminum recording 2297 MT and 754 MT respectively in May 2020.
Ideal Barometer?
Experts contend that the steel futures index would be an ideal barometer to measure the dynamics of steel trade and give purchase managers at steel mills a consistent set of guidelines, with price transparency and efficiency of the system giving businesses a long-awaited shot in the arm.
~ Inputs by Nirmalya Deb
Leave a Reply