Daily base metals trading on MCX hits over ₹5,500 cr; betters March levels

PTI Mumbai | Updated on June 21, 2020

The volume of base metals traded on commodities bourse MCX has more than doubled since the lifting of the lockdown, hitting a daily high of ₹5,531 crore on June 20 and has even bettered the March levels, according to the exchange.

While the daily average turnover of the five base metals traded on the MCX - aluminium, copper, lead, nickel and zinc - had plunged to a low ₹2,418 crore in April - when the whole country was in a full lockdown - from ₹4,757 crore in March.

From the April lows, the trading volume improved to ₹3,767 crore in May as the lockdown was partially lifted, the exchange data showed.

Chittaranjan Rege, head of base metals vertical at MCX, told PTI that volume has been steadily going up since the easing of lockdown, which had shuttered more than 80 per cent of the economy, and also attributed the growth to the shift to delivery-based trade since last July.

The daily volume has grown by 129 per cent from the April lows to ₹5,531 crore as of June 20, he said.

MCX controls over 94 per cent of the traded commodities market, trades in five base metals and is set to launch index-based trading in them from August in a staggered manner.

MCX began trading in base metals in January 2019 when it started to convert the contracts to delivery settlements. The first conversion was for aluminium in March followed by zinc in April, nickel and lead in June and finally copper in July 2019.

Rege said this shift has helped in better price discovery, which benefitted everyone in the value chain except the producers, who lost their brute pricing powers.

The physical market is very happy but not producers as the opaque market gave them too much benefit, is how he puts the benefits of the one year of delivery based trade.

Rege also said MCX traders could save hundreds of crores in inventory losses after the hurriedly clamped COVID-driven lockdown halted the movement of goods across the states and shuttered any activity by parking their deliveries at various MCX-empanelled warehouses, otherwise they would have been forced to dump their stock or engage in distress sales because of the complete lockdown.

In fact, we became their stockyards during the lockdown and their source-market after the lockdown was lifted, Rege said.

A glance through the volume on MCX showed a massive spike between March 20 when Mumbai went into lockdown ahead of the nationwide lockdown from March 25 and June 20.

For instance, while 1,460.21 metric tonnes of aluminium were stocked with MCX warehouses during the lockdown, 36.30 mt copper, 2,397.42 mt of lead and 451.10 mt of nickel and 3,268 mt of zinc were also in their warehouses, taking the total stored material to 7,613.11 mt of stock.

As the lockdown was eased gradually, as much 1,111.2 mt of aluminium, 2,121.86 mt of copper, 1882.89 mt of lead, 127 mt of nickel and zinc worth 3,480 mt—or 8,723 mt of base metals -- were sourced from MCX warehouses in June, according to Rege.

Meanwhile, the exchange will formally launch the negative pricing software by the end of July after conducting three mock trading sessions and will also start index trading on the base metals from August.

Published on June 21, 2020

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