Indian Commodity Exchange Limited (ICEX) on 7th, August showcased Steel Long Futures Contract (covering Billets and Ingot) in an awareness workshop at Raipur, CG, to overcome several challenges of the long steel industry. The event received a mixed response from the industry participants.
Chairman of GR Group of Industries Mr. Ramesh Agrawal ,as chief guest and the MD and CEO of ICEX Mr. Sanjit Prasad was present during the workshop.
Explaining the contract, ICEX CEO Mr. Prasad said
> 65% of the long products are produced by small and mid-size non-integrated steel producers who are fragmented all across the country.
> The prices of this market fluctuate daily which makes small and mid-size producers most vulnerable to volatile steel prices. They neither have control over prices of raw material nor on the prices of the finished products which puts them at price risk without availability of any hedging tool.
>The continuous pressure of daily price volatility forces small and mid-size producers to maintain their conversion cost and margins which affect their profitability.
ICEX Steel long future contracts would enable steelmakers to safeguard against the price uncertainty and protect business margins. Hedging on ICEX is similar to taking insurance against price risk or uncertainty but it cost lesser then general insurance. The biggest benefit it offers is, price fixing which results in fixed business profits eliminating price risk.
Industry participants suggested for relocating delivery center to Raipur , presently this contract has only one delivery center at Ghaziabad. The producers expressed their doubts asking to clearly specify whether the future contract is for long steel buyers or manufacturers.
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