Mumbai, 8 November 2010

Indian Commodity Exchange (ICEX) will develop India's first iron ore futures contract in association with Singapore-based Iron Ore and Steel Derivatives Association (IOSDA), the bourse said on Monday.

"We have tied up with IOSDA to develop a proper Indian iron ore contract," Sanjay Chandel, chief executive of ICEX, told Reuters. The iron ore contract is in the final stages of approval by Forward Markets Commission (FMC), the Indian commodity derivatives markets regulator.

The iron ore contract proposal was made by ICEX, which is part-owned by state-run MMTC Ltd , the biggest Indian trader of the commodity. Iron ore contracts in India, the world's third-largest producer of the ore, will help small exporters to hedge risk against fluctuating prices, traders and analysts said.

Indian Commodity Exchange Ltd (ICEX) recently signed a Memorandum of Understanding (MoU) with the Singapore-based globally reputed organization Iron Ore and Steel Derivatives Association (IOSDA), for the growth and development of iron ore and steel derivatives.

“Both the organizations have made significant progress within their own areas for the growth and development of the iron ore futures (IOF) market and are now willing to enter into a MoU to mutually share their knowledge and expertise for the further development and advantage of the industry,” Mr Ashwani Sondhi, Director of ICEX said.

It is interesting to note that ICEX has already initiated the process of regulatory approval to launch the IOF contract for the first time in the country. It will be the world’s first IOF contract whereby miners, processors, traders and importers can participate in the futures markets.

“The mineral industry is well established in the country and there is a need for establishing risk management tools for the industry for which our exchange has made the pioneering steps,” he said.

"The revolution in the iron ore pricing system has opened the door for the use of financial tools which can better manage price risk. Interest in and the use of these tools are growing as buyers and sellers come to understand their potential," Mr. Pedro Coatait, secretary, IOSDA said.

Singapore based IOSDA is an independent organization for producers, brokers bankers, exchanges and clearers and act in the best interests of its members for the benefit of the market place in which its members transact in the iron ore and related derivatives markets worldwide.

It may be recalled that besides the current pact, ICEX had also joined hands with the Federation of Indian Mineral Industries (FIMI), New Delhi, in September this year for promoting the development of an efficient IOF market in the country. Under the pact, both will share knowledge and expertise in this regard, besides establishing risk management tools for the industry.

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