Ncdex rolls out sponge iron futures

National Commodity & Derivatives Exchange (Ncdex) today launched futures contracts in sponge iron, a major raw material for the production of steel.

The exchange, which currently offers contracts in steel, copper, gold, silver, the Brent crude oil and furnace oil, apart from 38 agri commodities, thus added one more feather in its cap.

At present, the sponge iron contracts are available for the months of March and April 2006.

As per the contract terms, subsequent new contracts would be made available on the 10th of every month after April. If the 10th happens to be a holiday, such contracts could be offered on the next trading day of the month, an Ncdex source said.

An Ncdex official attributed a huge production size (about 10 million tonne), limited hedging options currently available, a large number of participants in the value chain, price volatility and its use as proxy for other raw materials like ferrous scrap and pig iron as the rationale behind the exchange's introducing sponge iron futures contracts.

"The sponge iron futures will provide the steel industry with an ideal risk management tool. Along with mild steel ingot futures contracts that have been well accepted by the market, the sponge iron futures can help the industry hedge its price risk on the raw material side," Ramesh Iyer, assistant vice-president, Ncdex, said.