The Hindu Business Line : MetalJunction, NCDEX to offer coal futures

According to MJSL sources, the e-auction outfit has joined hands with National Commodities and Derivative Exchange (NCDEX) for indexation of coal available in India in line with the global practice.

MORE CREDIBLE MARKET

Though MJSL has already developed a spot market, CoalJunction.com in collaboration with CIL, the indexation would help create a more credible spot market with transparent price benchmarks in terms of calorific value which is a prerequisite for success of any kind of futures market.

According to sources, once the index is launched both the parties can then work together to introduce OTC (Over-the-counter) trade underlining delivery backed counter-party hedging followed by a full fledged futures operations. The roll over to OTC trade, however, will take time.

Following the success of CoalJunction in securing roughly 60 per cent higher prices, the Union Coal Ministry has been considering launching of more such e-auction platforms as well as encouraging commodity exchanges in launching forward contracts on coal.

The ministry has enhanced the annual quota of over 36 million tonne for CoalJJunction. This is almost four times of its initial estimates of 10 million tonne to be sold through the portal which is considered instrumental in helping Bharat Coking Coal Ltd ( and Eastern Coalfields Ltd) - a perennially sick CIL subsidiary - to book profits for the first time in three decades.

NCDEX, which has already launched futures on crude and furnace oil, has been exploring possibilities in coal, especially in view of the rising crude prices.

Though traditionally never subjected to high price volatility in India and also globally which is a prerequisite to futures contracts, coal has caught the investors fancy in recent years.

Collaboration

Apart from coal, MJSL and NCDEX has also joined hands in promoting the trade of ferrous and non-ferrous metals and petroleum-products. While details of the association are not known according to informed circle the tie-up would pave way for MetalJunction's entry in energy segment. NCDEX, on the other hand, will have access to the huge customer base of MJSL in the metals segment. The latter is a reasonably large player in the metals segment.

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