Monday Jan 31, 2011* ICEX and MCX are quick to launch contracts before SMX
* SMX sticking to its planned launch in second quarter
By Siddesh Mayenkar
By Siddesh Mayenkar
MUMBAI, Jan 31,2011 (Reuters) - The world's first iron ore futures contracts attracted small exporters in their first two days of trade in India and could weather the launch of a Singapore offer as players try to hedge near-record high prices.
"We were surprised to get speculators and physical market players, and some of the big names are already trading in our contracts," Sanjay Chandel, chief executive officer at Indian Commodity Exchange (ICEX), told Reuters.
ICEX and rival Multi Commodity Exchange (MCX) launched their iron ore futures contracts on Saturday, just days after the markets regulator gave permission for four contracts and trumping Singapore's SMX which plans its contract in the second quarter.
The most actively traded Indian ore contract on ICEX, which promises 62 percent iron content for March delivery, had gained 0.05 percent to trade at 7,269 rupees per dry metric tonne (DMT), cost and freight (CFR) delivered to China.
The most actively traded Indian ore contract on ICEX, which promises 62 percent iron content for March delivery, had gained 0.05 percent to trade at 7,269 rupees per dry metric tonne (DMT), cost and freight (CFR) delivered to China.
The March 62 percent fines on the rival Multi Commodity Exchange (MCX) was trading 0.04 percent down at 7,266 rupees a tonne, free on board.
ICEX, which is part-owned by state-run MMTC Ltd (MMTC.BO: Quote), the biggest Indian trader of iron ore, recorded volumes of 21,300 DMT, while on MCX, the country's largest commodity exchange by turnover, volumes fell a little to 9,200 DMT from Saturday, the first day of trading.
Chandel expects more corporate participation in the near-term. "Going forward, we are bullish on the commodity, as far as turnover is concerned. Many miners and exporters are already our members," he said.
ICEX, which is part-owned by state-run MMTC Ltd (MMTC.BO: Quote), the biggest Indian trader of iron ore, recorded volumes of 21,300 DMT, while on MCX, the country's largest commodity exchange by turnover, volumes fell a little to 9,200 DMT from Saturday, the first day of trading.
Chandel expects more corporate participation in the near-term. "Going forward, we are bullish on the commodity, as far as turnover is concerned. Many miners and exporters are already our members," he said.
"There are many waiting on the fence. They have plans, and discussions are on," said Chandel.
Iron ore exporters Phulchand Exports and Bagadiya Brothers have taken membership with the exchanges, a source at an exchange dealing in the commodity said. Company officials declined to comment.
Iron ore exporters Phulchand Exports and Bagadiya Brothers have taken membership with the exchanges, a source at an exchange dealing in the commodity said. Company officials declined to comment.
CRUCIAL FIRST MONTHS
Interest in iron ore futures has bubbled since the world's major miners -- Vale (VALE5.SA: Quote) (VALE.N: Quote), Rio Tinto (RIO.AX: Quote) (RIO.L: Quote) and BHP Billiton (BHP.AX: Quote) (BLT.L: Quote) -- have switched to quarterly from annual pricing.
With global spot iron ore prices heading for $200 a tonne, buoyed by demand from China, the world's biggest buyer, exchanges are vying for business in a physical market second only in size to crude oil.
Up until Saturday's launch, investors have only had forward swaps or cash-settled derivatives available to hedge risk.
"The first six months would be crucial to judge whether this (contract) would be of any help, there are chances that it might turn out well," said Gnanasekar Thiagarajan, director, Commtrendz Research.
India is the world's third-biggest iron ore exporter after Australia and Brazil, but shipments have been hit by an export ban in its southern Karnataka state.
India normally exports around 100 million tonnes of iron ore annually of which around a quarter comes from Karnataka.
Interest in iron ore futures has bubbled since the world's major miners -- Vale (VALE5.SA: Quote) (VALE.N: Quote), Rio Tinto (RIO.AX: Quote) (RIO.L: Quote) and BHP Billiton (BHP.AX: Quote) (BLT.L: Quote) -- have switched to quarterly from annual pricing.
With global spot iron ore prices heading for $200 a tonne, buoyed by demand from China, the world's biggest buyer, exchanges are vying for business in a physical market second only in size to crude oil.
Up until Saturday's launch, investors have only had forward swaps or cash-settled derivatives available to hedge risk.
"The first six months would be crucial to judge whether this (contract) would be of any help, there are chances that it might turn out well," said Gnanasekar Thiagarajan, director, Commtrendz Research.
India is the world's third-biggest iron ore exporter after Australia and Brazil, but shipments have been hit by an export ban in its southern Karnataka state.
India normally exports around 100 million tonnes of iron ore annually of which around a quarter comes from Karnataka.
Singapore Mercantile Exchange (SMX) is sticking to its planned launch of a futures contract in the second quarter. [ID: nL3E7CQ09W]
"Our product strategy timelines are not altered and remain on course as planned," Thomas McMahon, chief executive of SMX, told Reuters in a email.
"The marketplace understands the differences well. We see SMX iron ore futures as more reflective of trans-Asian, Australian and Brazilian demand and supply pricing mechanisms," he added.
SMX, controlled by India's Financial Technologies (FITE.BO: Quote), is looking at establishing a cash-settled iron ore futures contract based on the iron ore index by data provider Metal Bulletin which uses a 62 percent iron content benchmark. (Additional reporting by Manolo Serapio Jr in Singapore;editing by Jo Winterbottom & James Jukwey, sourced Reuters)
"Our product strategy timelines are not altered and remain on course as planned," Thomas McMahon, chief executive of SMX, told Reuters in a email.
"The marketplace understands the differences well. We see SMX iron ore futures as more reflective of trans-Asian, Australian and Brazilian demand and supply pricing mechanisms," he added.
SMX, controlled by India's Financial Technologies (FITE.BO: Quote), is looking at establishing a cash-settled iron ore futures contract based on the iron ore index by data provider Metal Bulletin which uses a 62 percent iron content benchmark. (Additional reporting by Manolo Serapio Jr in Singapore;editing by Jo Winterbottom & James Jukwey, sourced Reuters)
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