India's First PRA-Based Contract: NCDEX has launched India's first steel scrap futures contract based on a Price Reporting Agency (PRA) benchmark, introducing an organised mechanism for price discovery and risk management in the fragmented steel scrap market.
BigMint Partnership: The contract uses BigMint Technologies' daily price assessments for Heavy Melting Scrap (HMS) 80:20, comprising 80% HMS Grade 1 and 20% Grade 2. The framework follows IOSCO principles for price reporting agencies.
Key Contract Specifications: The trading unit is 10 metric tonnes, with a maximum order size of 500 tonnes and a tick size of ₹10 per tonne. The contract is cash-settled, with Mandi Gobindgarh, Punjab, as its basis centre.
Growing Domestic Scrap Market: India's domestic steel scrap generation increased 22% year-on-year to 32 million tonnes, while ferrous scrap imports declined 20%, highlighting the growing importance of domestic scrap supply.
Industry-Wide Hedging Opportunity: Steelmakers can use futures to lock in scrap procurement costs, while billet, wire rod and sponge iron producers can hedge against potential price declines. HMS 80:20 prices reportedly have a 90% correlation with billet prices and 89% with wire rod prices.
