Aluminium, zinc ingot futures from today

Enthused by the success of steel futures, the National Commodity and Derivatives Exchange (NCDEX) is launching aluminium ingot, nickel cathode and zinc ingot futures on Monday. This will help domestic base metals producers, traders and users to hedge their risk.

All these contracts would be settled on the basis of international prices in rupee denomination. Keeping in view the high prices of aluminium in the international market and covering both high and low profile traders, the NCDEX has fixed two metric tonne of contract size for aluminium ingot, 250 kg for nickel and two metric tonne for zinc. Bhiwandi will be the base centre and Delhi additional delivery centre for the contracts.

The maximum trade limit for aluminium ingot and zinc ingot is 5 per cent either side and 6 per cent for nickel cathode. If the metal moves beyond this limit, trade would be stopped for 15 minute. Once the trade starts again, it would offer another maximum limit of 2.5 per cent in aluminium ingot and zinc ingot and 3 per cent in nickel cathode.

The trade would attract a margin of 5 per cent in aluminium and zinc while 6 per cent in nickel cathode, the NCDEX sources said. "Unlike other exchanges, the metals futures are sellers' options. Despite delivery centres set for all these metals, sellers would decide whether to deliver these metals or settle the contract with cash," said sources.

"Launch of deliver-based futures contracts will give hedgers a genuine platform to hedge their price risk in non ferrous metals in this highly volatile markets," said Sanjay Singhavi, chief of base metals, NCDEX.

Despite a resource base of 385 mn tonne, India is a net importer of zinc.There has been an increase in zinc demand after the expansion of galvanised products in particular, and steel in general.

Globally, zinc demand is expected to grow at 5-6 per cent in the coming years. The galvanised steel consumption is expected to mount which would lift the demand of zinc as well. India consumes about 4.5 lakh tonne of zinc every year. Similarly, stainless steel demand is all set to increase not only in industrial applications but also for the domestic use. Depending solely on imports, India consumes about 25,000 - 30,000 metric tonne nickel every year.

The aluminium production in India is spearheaded by the Aditya Birla Group owned Hindalco which produced 4.28 million tonne (MT) aluminium and 12 MT alumina followed by the state-owned Nalco produced 0.36 MT aluminium and 1.58 MT alumina in 2005. The Sterlite managed Vedanta Group company, Balco and Malco produced 139,350 metric tonne, 36,600 metric tonne aluminium and 200,000 metric tonne and 70,000 metric tonne alumina respectively.

India's present per capita consumption of aluminium is close to 0.80 kg against the per capita consumption of 22-36 kg of the developed countries.

The consumption is likely to grow faster with the growing power transmission, transportation, construction and packaging sector. Assuming a growth rate of 8 per cent India's present demand for aluminium which is around 0.8 MT is likely to be close to 1.2 MT by the end of 2010.