Mumbai: The National Commodity & Derivatives
Exchange Ltd (NCDEX) has launched trading in futures contract
in polymers to help market participants'' - producers,
processors, and distributors/ traders - hedge against
volatility in prices. Trading has commenced in three polymer
products - Polypropylene (PP), Linear Low Density Polyethylene
(LLDPE) and Polyvinyl Chloride (PVC).
Mukesh D. Ambani, chairman and managing director of Reliance
Industries Ltd (RIL), India''s largest private sector company,
rang the opening bell in the presence of top NCDEX officials
PH Ravikumar, MD & CEO, and Narendra Gupta, chief
of strategy, to mark the opening of trading in the contract.
The contract, among other things, seeks to address concerns
arising out of extreme volatility in prices, inconsistent
input price correlation, and lack of a suitable derivative
instrument to support risk management (hedging) in the
The unit of trading as well as the delivery unit for the
polymer futures contract is 3 metric tons. The delivery
centre and additional delivery centre for the contract
is at NCDEX accredited warehouses at Bhiwandi and Delhi
approved local and imported grades can be delivered at
these delivery centres at par. Daily price fluctuation
limit for the contract has been set at 6 per cent. Position
limit for members and individual clients has been set
at 20,000 metric tons and 5,000 metric tons respectively.
The prevalent spot prices of polymer products as specified
in the futures contract is derived through a polling process,
whereby the exchange randomly calls up 20 market participants
from a panel of 40 participants for the spot prices twice
a day. The prices are then subjected to a ''bootstrapping''
process (a scientific process for removing prices that
are too far away from the mean) and averaging the remaining
"Currently polymer producers, processors, and distributors/
traders are highly vulnerable to volatility in raw material
prices and have very little bargaining power against suppliers.
We have launched the polymer futures contract to alleviate
this situation. Trading on our exchange will not only
lead to better price discovery but also help market participants
mitigate risks arising out of price volatility,"
said PH Ravikumar, MD & CEO, NCDEX.
That there is a demand-supply gap in polymers is underscored
by the fact that in 2005-06, the production capacity of
polymers was about 5 million metric tons per annum (MMTA)
while the demand was around 5.6 MMTA.
is used for the manufacture of woven sacks, furniture
and household products, packaging films, etc; LLDPE is
used for manufacturing water tanks, shopping bags, etc;
and PVC is used for manufacturing plumbing/conduit fixtures,
window profiles, bean bags, shoe soles, pipes, electrical
wires & cables, etc, there is scope for consumption
growth in polymers.
The per capita consumption of polymers in India at 4.2
kg is way below the global average of 25 kg.
NCDEX is the premier commodity exchange in India that
provides a world-class online trading platform for market
participants to trade in a wide range of commodities.
With over 800 members around 550 centers and over 8,076
trading terminals, daily volumes (one sided) on NCDEX
averaged about Rs3,800 crore in FY 06-07. In size, it
ranks first in India and accounts for about 50 per cent
of the volumes traded on the exchange in India.
NCDEX has emerged as the world''s third largest agricultural
exchange as per the Geneva-based United Nations Conference
on Trade and Development (UNCTAD).
The exchange has nine institutional shareholders: CRISIL,
ICICI Bank, IFFCO, LIC, NABARD, NSE, PNB, Canara Bank
and Goldman Sachs.