Financial Daily from THE HINDU group of publications
Friday, Mar 24, 2006
Financial Daily from THE HINDU group of publications Friday, Mar 24, 2006 |
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Agri-Biz & Commodities
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Commodity Exchanges Industry & Economy - Coal Commodity bourses turn to coal Pratim Ranjan Bose
Kolkata , March 23 After crude oil and oil derivatives, it is now the turn of coal to catch the fancy of national commodity exchanges. According to sources, leading national commodity exchanges are in active deliberation about the possibilities of launching forward contracts on this fossil fuel. While MCX is believed to be in a comparatively advanced stage of finalising the launch of such contracts, NCDEX is believed to be relatively hesitant about its prospects. "As on date we are not interested in futures on coal," said an NCDEX spokesperson when contacted. Traditionally considered as a laid-back commodity, heavily dominated by long term supply contracts resulting into low price volatility, coal has started gaining its importance in the world energy market in the last two to three years. In fact, so low was the price volatility that forward contracts on coal had never attracted significant liquidity in NYMEX against other energy commodities or products. Incidentally, NYMEX is the only commodity exchange in the world having forward contracts on coal. The scenario, however, improved substantially in the last few years. The emergence of (OTC) trading in coal in South Africa, Australia and London paved way for increasing counter-party hedging.
Price volatility
Though price volatility especially that of thermal and coking coal are on the rise in India, industry insiders are not sure whether the time is ripe yet for the success of forward contracts. According to them, price volatility of coal is still 2.5 per cent per annum against 25 per cent of crude. Given that speculators rule the roost in domestic commodity futures markets, such low volatility may prove insufficient to attract investments in coal futures.
More Stories on : Commodity Exchanges | Coal
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