Mumbai: India’s commodity markets regulator Forward Markets Commission (FMC) has allowed futures trade in iron ore, its chairman told Reuters on Tuesday, opening up an opportunity for exporters to hedge price risk.
“I have approved it and allowed four contracts,” said chairman B.C. Khatua.
Multi Commodity Exchange, the country’s largest by turnover, and Indian Commodity Exchange are the bourses that had proposed to start iron ore futures.
At present, iron ore trade is enabled through swap deals, which is a cash-settled derivative, between a seller and a buyer at a fixed price for a set amount of time that provides price certainty for both the buyer and seller.
Iron ore contracts in India, the world’s third-largest producer of the ore, will help small exporters to hedge risk against fluctuating prices, which have been marching towards $200 a tonne, a record last seen in February 2008.
The southern state of Karnataka had in July banned export the much-needed raw material for steel making, citing higher domestic demand.
Another top iron ore producing state, Orissa, is also seeking a ban on exports of the steel making commodity, and is likely to send a proposal to the federal government in a month.
In December, India’s annual iron ore exports fell for the sixth straight month as the exports ban continued to bite, but the pace of the fall slowed versus the previous month due to demand from China.
Iron ore exports during the April-December fell 17.02% from a year earlier to 64.4 million tonnes, data from the Federation of Indian Mineral Industries (FIMI) showed.