NCDEX launches futures trading in polymers

Mumbai, April 16, 2007: The National Commodity & Derivatives Exchange Ltd (NCDEX) today launched trading in futures contract in polymers to help market participants' "� producers, processors, and distributors/ traders "� hedge against volatility in prices. Trading has commenced in three polymer products "� Polypropylene (PP), Linear Low Density Polyethylene (LLDPE) and Polyvinyl Chloride (PVC).

Mr. Mukesh D. Ambani, Chairman and Managing Director of Reliance Industries Ltd (RIL), India's largest private sector company, rang the opening bell in the presence of top NCDEX officials- Mr. PH Ravikumar, MD & CEO, and Mr. Narendra Gupta, Chief-Strategy, to mark the opening of trading in the contract

NCDEX has designed the polymer futures contract as per the requirements of the market participants. The contract, among others, seeks to address concerns arising out of extreme volatility in prices, inconsistent input price correlation, and lack of a suitable derivative instrument to support risk management (hedging) in the plastic industry.

The unit of trading as well as the delivery unit for the polymer futures contracts is 3 metric tons (MTs). The delivery centre and additional delivery centre for the contracts are at NCDEX accredited warehouses at Bhiwandi and Delhi respectively. Exchange approved local and imported grades can be delivered at these delivery centres at par. Daily price fluctuation limit for the contract has been set at 6%. Position limit for members and individual clients has been set at 20,000 MTs and 5,000 MTs respectively.

The prevalent spot prices of polymer products as specified in the futures contracts are derived through a polling process, whereby the exchange randomly calls up 20 market participants from a panel of 40 participants for the spot prices twice a day. The prices are then subject to a 'bootstrapping' process (a scientific process for removing prices that are too far away from the mean) and averaging the remaining prices.

Speaking on the occasion, Mr. PH Ravikumar, MD & CEO, NCDEX, said "currently polymer producers, processors, and distributors/ traders are highly vulnerable to volatility in raw material prices and have very little bargaining power against suppliers. We have launched the polymer futures contract to alleviate this situation. Trading on our exchange will not only lead to better price discovery but also help market participants mitigate risks arising out of price volatility."

In 2005-06 the domestic market saw a demand supply gap. While the production capacity of polymers was about 5 million metric tons per annum (MMTA), the demand was around 5.6 MMTA.

The per capita consumption of polymers in India at 4.2 Kgs is way below the global average of 25 Kgs. This goes to show that there is immense scope for consumption growth in polymers. Polymers have wide ranging applications "� PP is used for manufacturing woven sacks, furniture & household products, packaging films, etc; LLDPE is used for manufacturing water tanks, shopping bags, etc; and PVC is used for manufacturing plumbing/conduit fixtures, window profiles, bean bags, shoe soles, pipes, electrical wires & cables, etc,.

About NCDEX: NCDEX is an online multi-commodity exchange driven by professionalism, transparency and best global practices. It is the premier commodity exchange in India and provides a world-class online trading platform for market participants to trade in a wide range of commodities. NCDEX has emerged as the world's third largest third largest agricultural exchange as per an article of the Geneva (Switzerland) Headquartered United Nations Conference on Trade and Development (UNCTAD).

The exchange has nine institutional shareholders: CRISIL, ICICI Bank, IFFCO, LIC, NABARD, NSE, PNB, Canara Bank and Goldman Sachs. NCDEX commenced trading on December 15, 2003 and offers trading facilities through over 800 members with around 550 centers and over 8076 trading terminals. In terms of volumes (one sided), NCDEX have an average daily volume of trade of about Rs. 3800 crores in FY 06-07. In size, it ranks first in India and accounts for about 50% of the volumes traded on the exchange in India.