Steel futures gathers momentum on ICEX
The Indian Commodity Exchange ( ICEX) has witnessed a sharp jump in the delivery of steel long. The platform had launched steel long futures contract launched on August 28, 2018. It concluded the settlement process of its second expiry on December 5, 2018. The settlement witnessed deliveries of 590 tonnes (MT) of the underlying deliverables at the ICEX accredited warehouse at Ghaziabad.
Launched in August, the first steel long contract on the platform expired in November this year with deliveries of 30 MT. According to ICEX, the second contract saw significant increase in volumes on account of extended participation of traders, hedgers, arbitrageurs and users on the exchange platform.
Sanjit Prasad, managing director and chief executive officer, ICEX, ICEX says, “The ICEX steel long contracts have witnessed increased participation within a short period of time since its launch, amidst continued volatility in the steel spot prices. The rise in the open interest witnessed in the contracts in the last three months does signify the value addition that these contracts are providing to the participants in their business operations.”
With the launch of futures contracts in steel longs, their co-relation with spot markets has increased which in turn has encouraged traders to hedge risk on the exchange platform.
“The very high correlation of the ICEX contract prices with the underlying steel long product spot prices, that we have witnessed since the launch, will encourage increased participation from across the country in the upcoming months. The successful settlement of the second expiry of the contract that was due on December 5, 2018 by way of deliveries of 590 MT only strengthens the credibility of the prices traded on the ICEX platform,” adds Prasad.
ICEX Steel long futures contracts have seen a total deposit of 720 MT at its Ghaziabad accredited warehouse since the launch of futures contract in August. The contracts have been witnessing higher participation in terms of traded quantity and growing open interest.
Further, the contracts have also witnessed the traded prices correlating very highly with the daily spot prices of the corresponding underlying product at key locations across India.
Earlier, the contract which expired in November had also witnessed the close convergence of the traded prices with the spot prices at Ghaziabad.
ICEX Steel long contracts are the only metal (ferrous and non-ferrous) derivative contracts in the Indian commodity derivatives ecosystem, based on the compulsory delivery mode of settlement.