MCX Products

Bullion

Owing to their scarce availability in nature, most of the metals that have been categorised as “precious metals” (they are quite few) have been historically considered as a form of currency. However, today they are regarded mainly as investment and industrial commodities. Nevertheless gold, silver, platinum and palladium still possess an ISO 4217 currency code, which indicates that they are not just commodities but de facto money. According to estimates, the gold acquired over the years in India is around 20,000 tonnes, the largest holdings by any country. Owing to limited bullion supplies, the demand has been largely met through imports.

Apart from the common man, central banks also have been holding gold reserves as a store of value right from the days of Gold Standard and Bretton Woods Standard. In 2009, the Government of India purchased 200 tonnes of gold from the International Monetary Fund (IMF) at $6.7 billion. This purchase propelled India to the tenth position among top gold reserves holding nations.

Gold

  • Gold is the oldest precious metal known to man and for thousands of years it has been valued as a global currency, a commodity, an investment and simply an object of beauty.
  • The biggest producers of gold are China, Australia, United States, South Africa, Russia, Peru and Indonesia. The biggest consumers of gold jewelry are India, China, United States, Turkey, Saudi Arabia, Russia and UAE. Gold Futures are available for Trading in the MCX
  • Half of the gold consumption in the world is in jewelry, 40% in investments, and 10% in industry. However, Gold is not only a precious metal but also a commodity vital for many industries.
  • Gold is an excellent conductor of electricity, is extremely resistant to corrosion, and is one of the most chemically stable of the elements, making it critically important in electronics and other high-tech applications.
  • Risk management is of critical importance for gold value chain participants, such as mining companies, processors, companies dealing in gold and gold products, jewellers, and even governments which rely on the proceeds of bullion consumption and trade. Modern hedging techniques and strategies, including market-based risk management financial instruments, such as gold futures, can improve efficiencies and consolidate competitiveness.
  • Hedge against inflation and currency devaluation.

Factors Influencing the Market

  • Above-ground supply of gold from central bank sales, reclaimed scrap, and official gold loans.
  • Hedging interest of producers and miners.
  • World macroeconomic factors, such as movement in the dollar and interest rate, and economic events.
  • In India, gold demand is also influenced by seasonality, that is, marriage and harvesting.

Silver

Silver is a brilliant grey-white metal that is soft and malleable. The mining of silver began some 5000 years ago, with the first mine being in Anatolia (modern-day Turkey). The principal sources of silver are the ores of silver, silver-nickel, lead, and lead-zinc obtained from Peru, Bolivia, Mexico, China, Australia, Chile, Poland, and Serbia. Peru, Bolivia, and Mexico have been mining silver since 1546, and are still major world producers. Just over half of the mined silver comes from Mexico, Peru, China, and Australia, the four largest producing countries. Primary mines produce about one-third of the world silver, while around two-thirds come as a byproduct of gold, copper, lead, and zinc mining. The top three silver-producing mines are Cannington (Australia), Fresnillo (Mexico), and San Cristobal (Bolivia). In Central Asia, Tajikistan is known to have some of the largest silver deposits in the world.

Silver has innumerable applications in art, science, industry and beyond. At the highest level, though, demand for silver breaks down into three important categories: silver in industry, investment, and silver jewellery and décor. Together, these three areas represent more than 95% of the annual silver demand. With unique properties, including its strength, malleability, and ductility; its electrical and thermal conductivity; its sensitivity to and high reflectance of light; and the ability to endure extreme temperature; it is an element without substitution. Commercial-grade fine silver is at least 99.9% pure, and purities greater than 99.999% are available.

Silver futures and options contracts are used by mining companies, fabricators of finished products, and users of silver-content industrial materials to manage their price risk. As a precious metal, silver also plays a role in investment portfolios. The largest industrial users of silver are the photographic, jewelry, and electronic industries.

Factors Influencing the Market

  • Economic events such as India’s industrial growth, the global financial crisis, recession, and inflation affect prices.
  • Geopolitical events involving governments or economic paradigms and armed conflict can cause major changes.
  • Commodity-specific events, such as the construction of new production facilities, introduction of new processes, unexpected mine or plant closures, and industry restructuring too affect the market.
  • As societies develop, their demand for metal increases based on their current economic position, which could also be referred to as ‘national economic growth factor’.

Base Metals

Metallurgy is one of the oldest applied sciences with history dating back to 6000 BC. Seven metals known as the Metals of Antiquity, namely gold (6000 BC), copper (4200 BC), silver (4000 BC), lead (3500 BC), tin (1750 BC), smelted iron (1500 BC), and mercury (750 BC), were the metals upon which ancient human civilizations were based. Today, there more than 85 metals known to human beings. In chemistry, the term base metal informally refers to a metal that oxidizes or corrodes relatively easily, and reacts variably with diluted hydrochloric acid to form hydrogen. It is a common and inexpensive metal, as opposed to a precious metal. Chemical, physical and aesthetic properties of the metal make them the preferred ingredients in a wide range of domestic, industrial, and technological applications.

The Indian metal industry, endowed with huge deposits of natural resources in minerals like copper, chromite, iron ore, manganese, bauxite, and gold, got a major boost in the 1990s with the onset of liberalization and open-market policies. With larger investments and technological advances pouring in, output of the industry has increased and so has the quality of the products.

Aluminium

It may be hard to believe but only 150 years ago aluminium was considered to be silver from clay and an extremely expensive kind of metal. Today, aluminium ranks number two in the consumption volumes among all the metals, surpassed only by steel. In the coming decades the demand for aluminium will continue increasing at unstoppable rates. Recent developments in the motor industry, the rapid growth of cities, new potential uses of aluminium as a substitute to copper in the power industry – these and many other trends mean that the winged metal is well placed to strengthen its dominant position as a key structural material of the 21st century.

In the 10 years that followed, from 1890 until 1899, global aluminium production amounted to 28 thousand tonnes. By 1930 it had increased by 10 times – to 270 thousand tonnes, which is equal to the output of today's average aluminium smelter. In the middle of the twentieth century global aluminium production amounted to 1 million tonnes a year, and in 1973 – 10 million tonnes. These trends persisted in the following decades, and in 2014, production volumes exceeded 55 million tonnes. It is expected to amount to 60 million tonnes in 2016.

The realities of the market call for risk management techniques that are critical for users of aluminium, such as producers, exporters, marketers, processors, and SMEs. When uncertainty looms large, modern techniques and strategies, including market-based risk management financial instruments like ‘Aluminium Futures’, offered on the MCX platform can improve efficiencies and consolidate competitiveness through price risk management. The importance of risk management thus cannot be overstated.

Factors influencing the market

  • Indian copper prices reflect prevailing international spot market and the USD–INR exchange rates.
  • Commodity-specific events, such as the construction of new production facilities or processes, new uses or the discontinuance of historical uses, unexpected mine or plant closures (natural disaster, supply disruption, accident, strike, and so forth), or industry restructuring—all affect the price of the metal.
  • Trade policies set by the government (implementation or suspension of taxes, penalties and quotas) affect supplies as they regulate (restricting or encouraging) material flow.

Lead

Lead is a soft, malleable, ductile, bluish-white, dense metallic element, extracted from galena and found in ore with zinc, silver and copper. 80 percent of modern lead usage is in the production of batteries. Lead is also often used to line tanks that store corrosive liquids and as a shield against X and gamma-ray radiation. The biggest producers of lead are Australia, China and USA, followed by Peru, Canada, Mexico, Sweden, Morocco, South Africa and North Korea.

Lead is principally used for manufacturing batteries, especially the ones used in automobiles, motorcycles, and electric cars. Its incredible density provides protection from radiation and is used in hospitals, dental surgeries, laboratories, and nuclear installations. Lead acid batteries provide vital back-up emergency power supply during power failures in computer installations, banks, telephone exchanges, and aircraft control towers, among others. In earthquake-prone regions, such as Japan and California, the buildings are mounted on lead shock absorbers that help minimize damage during tremors or earthquakes.

The realities of the market call for efficient risk management techniques that are important for participants, such as producers, exporters, marketers, processors, and SMEs. When the future is unknown, modern techniques and strategies, including using market-based risk management financial instruments like ‘Lead Futures’, offered on the MCX platform can improve efficiencies and consolidate competitiveness through price risk management

Factors Influencing the market

  • Lead prices in India are fixed based on the rates in the international spot market, and the Indian rupee–US dollar exchange rates.
  • Economic events such as national industrial growth, global financial crisis, recession, and inflation, affect the metal prices.
  • Commodity-specific events, such as the construction of new production facilities or processes, unexpected mine or plant closures (natural disaster, supply disruption, accident, strike, and so forth), or industry restructuring, affect metal prices.
  • Trade policies set by the government affect supply as they regulate material flow.

Nickel

  • Nickel high melting point and resistance to corrosion have contributed to its diversified use. Nickel is mainly used in the production of stainless steel and other alloys and can be found in food preparation equipment, mobile phones, medical equipment, transport, buildings, power generation. The biggest producers of nickel are Philippines, Russia, Canada, New Caledonia, Australia, Indonesia, Brazil, Cuba and Colombia.
  • About 65% of the nickel produced is used to manufacture stainless steel. Another 20% is used in other steel and non-ferrous alloys, often for highly specialized industrial, aerospace, and military applications. About 9% is used in plating and 6% for other uses, including coins, electronics, batteries for portable equipment, and hybrid cars. In many of these applications there is no substitute for nickel without impairing performance or increasing cost.
  • Nickel gets precedence over other metals because it offers better corrosion resistance, better toughness, and better strength at high and low temperatures; it also provides a range of special magnetic and electronic properties.
  • In the nickel market, risk management techniques are critical for participants such as producers, exporters, marketers, processors, and SMEs. Given an uncertain future, modern techniques and strategies, including market-based risk management financial instruments, such as ‘Nickel Futures’, offered on the MCX platform can improve efficiencies and consolidate competitiveness through price risk management.

Factors influencing the market

  • Prices ruling in international markets.
  • Indian rupee and US dollar exchange rates.
  • Economic events such as national industrial growth, global financial crisis, recession, and inflation, affect the metal prices.
  • Commodity-specific events, such as the construction of new production facilities or processes, unexpected mine or plant closures (natural disaster, supply disruption, accident, strike, and so forth), or industry restructuring, affect metal prices.
  • Geopolitical events.

Zinc

  • Zinc is a lightweight and corrosion-resistant metal. It is often used in die-casting alloys, castings, brass products, sheeting products, chemicals, medicine, paints and batteries. The biggest producers of zinc are. China, Peru, Australia, United States, Canada, India and Kazakhstan.
  • Due to its resistance to non-acidic atmospheric corrosion, zinc plays a vital role in extending the life of buildings, vehicles, ships, and so on. The metal is mainly used as an anti-corrosion agent, and a coat of zinc prevents rusting of galvanized steel. It also finds its use in the automobile, battery, petroleum, paint, fungicide, rubber, and chemical industries—a few among the many industrial uses it is being put to today.
  • Stakeholders of the zinc market consisting among others, producers, exporters, marketers, processors, and SMEs, can use modern risk management techniques and strategies, including market-based risk management financial instruments like Zinc Futures, offered on the MCX platform to improve efficiencies and consolidate competitiveness
  • Factors influencing the markets

    • Zinc prices in India are fixed based on the rates that rule in the international spot market, and INR–USD exchange rates.
    • Economic events, such as the national industrial growth, global financial crisis, recession, and inflation, affect metal prices.
    • As societies develop, their demand for metal increases based on their current economic position, which could also be referred to as ‘national economic growth factor’.

Energy

Of the numerous forms of energy, crude oil and natural gas combined comfortably constitute more than half of the total primary energy consumed in 2014. Due to its high energy density, easy transportability and relative abundance, crude oil has become the world's most important source of energy since the mid-1950s. Interestingly, oil finds a mention more than 4000 years ago; according to Herodotus and Diodorus Siculus there were oil pits near Babylon. However, oil was first used commercially in the 1850s when Ignacy Łukasiewicz discovered the process to distill kerosene from seep oil (petroleum seeps) that provided a cheaper alternative to whale oil. The demand for the petroleum as a fuel then quickly grew; leading to the world's first commercial oil well in Poland in 1854, constructed by Łukasiewicz. Interestingly, Lukasiewicz is also credited with the invention of the kerosene lamp (1853) and the introduction of the first street lamps in Europe (1853).

Natural gas, a combustible mixture of hydrocarbon gases is largely known for its clean and safe source of energy. As early as about 500 BC, the Chinese discovered the potential of natural gas seeping through the earth’s surface. They used it to boil sea water, separating the salt and making it drinkable. Around 1785, Britain became the first country to commercialize the use of natural gas; natural gas produced from coal was used to light houses as well as streetlights.

Crude Oil

  • Crude oil is the world's most actively traded commodity, and the crude oil futures contract is the world's most liquid form for crude oil trading, as well as the world's largest-volume futures contract trading on a physical commodity. Because of its excellent liquidity and price transparency, the contract is used as a principal international pricing benchmark.
  • Even though most crude oil is produced by a relatively small number of companies, and often in remote locations that are very far from the point of consumption, trade in crude oil is both robust and global. Nearly 80% of international crude oil is transported through waterways in supertankers.
  • The majority of oil reserve in the world is in the Middle East, at 48 per cent of the known and identified reserves. This is followed by North America, Africa, Central and South America, Eurasia, Asia and Oceania, and Europe.
  • India imports over 60 per cent of its crude oil from the Middle East, including around 18 per cent from Saudi Arabia and over 10 per cent from Iran. OPEC controls almost 40 per cent of the world's crude oil, accounts for about 75 per cent of the world's proven oil reserves, and exports 55 per cent of the oil traded internationally.
  • Risk management techniques are extremely important for the various stakeholders and participants, such as producers, exporters, marketers, processors, and SMEs. Modern techniques and strategies, including market-based risk management financial instruments like Crude Oil Futures, offered on the MCX platform can improve efficiencies and consolidate competitiveness through price risk management.

Factors influencing the markets

  • OPEC output, supply, and spare capacities
  • US crude and products inventories data
  • Weather conditions
  • Increased demand from emerging and developing countries; geopolitics
  • Speculative buying and selling

Natural gas

  • Natural gas is a vital component of the world's energy supply. It is one of the cleanest, safest, and the most useful of all energy sources. Given its growing resource base and relatively low carbon emissions compared with other fossil fuels, natural gas is likely to play a greater role in the world energy mix.
  • As early as about 500 BC, the Chinese discovered the potential of natural gas seeping through the earth’s surface. They used it to boil sea water, separating the salt and making it drinkable. Around 1785, Britain became the first country to commercialize the use of natural gas; natural gas produced from coal was used to light houses as well as streetlights.
  • Without any effective transportation method, natural gas discovered before World War II was usually just allowed to vent into the atmosphere, or burnt, when found alongside coal and oil, or simply left in the ground when found alone. Once the transportation of natural gas was possible, new uses were discovered. These included heating homes and operating appliances, such as water heaters, ovens, and cooktops. Industry began to use natural gas in manufacturing and processing plants, in boilers used to generating electricity.
  • Given the volatility in international natural gas prices, risk management techniques are of utmost importance for stakeholders of this commodity, particularly its users. Amidst uncertainty, modern techniques and strategies, including market-based risk management financial instruments like ‘Natural Gas Futures’, offered on the MCX platform can improve efficiencies and consolidate competitiveness through price risk management.

Factors influencing the market

  • International natural gas inventory data
  • US weather conditions
  • Price of crude oil
  • Industrial and residential demand in the U.S.

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