The Hindu Business Line : Polymer futures launched on NCDEX

Mumbai April 16 Polymer futures are known to be illiquid even on the London Metal Exchange, despite prices being volatile. However, there is optimism over the launch of polymer futures on National Commodity & Derivatives Exchange (NCDEX) on Monday. And the optimism stems from its contract design, say NCDEX top brass.

"We have learnt from the success of our steel contract (also otherwise known to be illiquid) that if a futures contract is designed around the contours of physical markets and allow delivery, the contract finds acceptance and therefore liquidity," said Mr P.H. Ravikumar, NCDEX's Managing Director and Chief Executive Officer.

Trading commenced in three polymers products - polypropylene, linear low density polyethylene and polyvinyl chloride, - used in consumer items spanning from tooth-brushes to televisions.

Mr Mukesh Ambani, Chairman and Managing Director, Reliance Industries Ltd, launched the polymer futures. Mr Ambani said he would propagate use of the futures platform to Reliance polymer customers to hedge their risks so that the customer would benefit.

Working with Reliance

Given Reliance's presence in the polymer industry, it can reach and extend its products to various markets through NCDEX platform, Mr Ravikumar said. "We can also work together with Reliance in other areas such as Brent crude oil, natural gas, carbon credits, agricultural products (non-perishable)," he added.

This would essentially mean that the company would participate on the exchange platform either to buy products probably for its retail forays or sell its manufactured products from/into the accredited warehouses of the exchange. However, before that, it would require the warehouses to be prepared with facilities such as re-packing, said Mr Ravikumar.

Major demand for the polymer industry is set to come from the agricultural sector followed by the retail giants, PVC pipes for water supply, consumer products and not the last industrial usersni. It is important to have instruments like these (futures) available in the value chain, Mr Ambani said.

The domestic polymer production last year was about five million tonnes (mt) against the demand of 5.6 mt, according to an NCDEX note.

Contract specifics

The trading unit is three tonnes. The contract attracts an initial margin of 2.5 per cent with the tick size of 10 paise. The contract is for compulsory delivery if the exposure is open during the delivery period. Delivery can be taken from the NCDEX accredited warehouse at Bhiwandi and Delhi. The settlement price for the contract would be derived through domestic polling and boot strapping method.

Low level of consumption of polymer in the country is to double in the seven years, said Mr K.V. Kamath, MD & CEO, ICICI Bank. The per capita consumption of polymers in the country is 4.2 kg against the global average of 25 kg.

More Stories on : Commodity Exchanges | Chemicals

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Polymer futures launched on NCDEX

11th Plan rice output target fixed at 115 m tonnes

Upasi opposes change in rubber import tariff

Spot rubber rules steady

Fair demand at tea sales in Coimbatore

Weather woes

1.5 lakh bales cotton imports in the offing

Pepper futures rebound

Over-heated market

Sugar inventories may top 110 lakh tonnes next year