MCX to launch world’s first Brass Futures contract
MUMBAI (Scrap Register): Multi Commodity Exchange of India Ltd will commence trading in Brass Futures contract on Monday, March 26, marking the first time that a Brass Futures contract will be traded on an organised exchange anywhere in the world.
MCX has announced the launch of Brass futures contract at an event organised in Jamnagar (Gujarat). The event witnessed overwhelming participation from several prominent stakeholders from the brass industry and the commodity ecosystem.
As there is no referenceable international or domestic benchmark for brass price currently, this contract will facilitate brass stakeholders to hedge their price risk.
The exchange, will commence futures trading in brass on Monday, March 26, 2018, marking the first time that a Brass Futures contract will be traded on an organised exchange anywhere in the world. Brass futures will not only provide its stakeholders with a more organised and robust price discovery platform, but will also help them to use a national level benchmark price as a ready reference to enable them to mitigate their price risk.
Three contracts ending in April, May and June 2018 will be available for trading. The lot size of the contract is 1 MT (metric tonne). Significantly, MCX Brass futures are the first non-ferrous contract with compulsory delivery option. The price is quoted ex-warehouse Jamnagar (basis centre) inclusive of taxes and duties, excluding GST. The ingots and billets are of IS-319 grade.
“The launch of brass futures contract reaffirms MCX's pioneering approach to designing products that serve the dynamic needs of market participants. The contract will lead to best price discovery for brass, which is of key relevance to its stakeholders including importers, exporters, manufacturers, refiners, and processors among others in the country, who are looking to hedge their price exposure. The initiative not only widens MCX's portfolio of metal offerings, but is also reflective of our commitment to the growth of commodity derivatives in India," said Mrugank Paranjape, MD & CEO, MCX.
“Almost the entire scrap for making brass gets imported into India, but the importers are not sure on the price until the brass shipments lands in the country. Moreover, the ingots & billets makers who buy scrap are never sure at what price they will get it. And finally, the product manufacturers who desire to have fixed input price of ingots & billets too have unpredictable business margins,” said Tulsibhai Gajera, President, Jamnagar Factory Owners Association, and Jamnagar Chamber of Commerce & Industry said.
“Presently, the entire value chain is unable to arrive at a single brass price, but with the introduction of the world’s first brass contract, MCX would provide a price discovery platform to the physical market participants and thus the brass value chain would get a single price to benchmark and hedge their risk exposure “, he added.
"During all these years, the need for a domestic benchmark brass price was being felt by the physical market participants. But now with the launch of brass futures contract a hedging tool would be available to market participants which will offer price transparency, and a level playing field for all its stakeholders,” said Kantibhai Joshi, President, Jamnagar Exim Metal Merchant Association.
“Given MCX's existing popular and successful product suite, and the market need for effective risk management tools, I am confident that MCX brass futures will be well received by its stakeholders,” Joshi added.
Brass is an alloy, which primarily contains around 55-60 per cent copper and the rest is zinc, with small amounts of lead and iron. It finds varied industrial use in electrical appliance, marine engines, pump parts, switch gears, sanitary ware, automobiles and defence sectors.
The estimated annual production of Brass in India is approximately between 100,000 MT - 150,000 MT. This includes production via primary metal and recycled brass. India imports huge quantities of brass scrap from US, Middle East, Africa and Europe which is then separated and recycled to make brass.
India also imports Copper and Zinc scrap which are also used to make brass. India is the largest exporter of finished brass products. Out of the 5,000 small and medium units producing brass in the country, about 3,000 are located at Jamnagar, and they account for 80 per cent of the brass produced in India. The rest of units are spread across Moradabad in Uttar Pradesh and Jagadhari in Haryana.