Due to lack of traders’ awareness and government restrictions in mining, iron ore futures trade in Indian Commodity Exchange (ICEX) has not been able to pick up, even after more than two months of its launch. Hence the bourse will take necessary steps to create awareness, said the exchange officials.
“Lack of awareness was the key reason, as it was the first such contract not only in Indian commodity market, but also in global market. We will take necessary steps along with other key stakeholders of the exchange to educate the traders. The awareness will not come overnight, it will take some time,” said Ashwani Sondhi, director (operations) with ICEX.
Open interest and volumes in iron ore have been at single or double digits since the launch of future trade on January 28, 2011.
Sources said, besides the lack of awareness, it was concerns about availability of the commodity that suppressed the market participation.
To curb illegal iron ore mining in the country, top producer Orissa slapped severe restrictions on mining activities in some areas in 2009.
The government took a series of measures to prohibit illegal mining that included issuing new transit passes to detecting mine boundary by digitalised maps.
All most half of the state’s 600 odd mines are shut since then.
“The government restriction was one of the reasons for poor trading participation in iron ore,” Sondhi said.
The state has high quality iron ore reserves with 62 per cent iron content, which is also traded on ICEX platform.
The local steel producers prefer to rely on physical iron ore supplies for their units, instead of electronic trade, which, according to them, does not have delivery guarantee.
“Even if there is no delivery guarantee, the traders can hedge their positions by cash settlements, which is also important for a steel producer,” explained Sondhi.
He said ICEX will organise a series of meetings in the country with iron ore traders to educate them about the trading and delivery pattern.
The commodity bourse has four iron ore delivery centres at Ennore, Vizag, and Paradip and Haldia port.
ICEX is jointly promoted by MMTC Ltd and Reliance Exchange Next, along with India Bulls.
The national commodity bourse has been functioning since 2009.
