The Dubai Gold and Commodities Exchange (DGCX) is delaying the launch of its steel futures contract until after summer to ensure a strong start, it said on Saturday.
The exchange had said it would launch the internationally tradeable steel futures contract on June 27. The DGCX has repeatedly delayed plans to launch.
‘The overwhelming requests to delay the launch to enable all players to actively take part have forced us to revise our start date,’ David Rutledge, a director at DGCX said in the statement.
‘Although this may disappoint some in the industry... the beginning days for any contract are important so as to ensure the best start with the maximum number of participants and volume of trade.’
The $500 billion steel market lacks a transparent global benchmark for setting prices or hedging risk.
‘The exchange so far has received good responses from banks and funds, but the key steel players in the market are still suspicious about it,’ a Dubai-steel producer said.
‘They still need some time in order to make sure that those players will trade the contract.’
The DGCX is banking on demand from the construction industry in the world’s biggest oil exporting region where more that $1 trillion worth of infrastructure projects are in the pipeline.
Futures contracts would allow steelmakers and their customers to reduce risk by locking in prices.
Openly traded futures would also allow financial market speculators to bet on whether steel prices rise or fall, just as they do in base metals, energy, currencies and stock markets.
The Dubai steel contract will be for reinforcing bar (rebar), used in construction. It is the first of four contracts targeted to the steel supply chain that the DGCX plans to issue.
The three others are for stainless steel, flat products and freight, but are not slated to start trading for at least 18-24 months, the exchange has said.
The rebar contract will be accessible to international investors, unlike steel contracts in India and China, which are only for domestic market participants. Source
The exchange had said it would launch the internationally tradeable steel futures contract on June 27. The DGCX has repeatedly delayed plans to launch.
‘The overwhelming requests to delay the launch to enable all players to actively take part have forced us to revise our start date,’ David Rutledge, a director at DGCX said in the statement.
‘Although this may disappoint some in the industry... the beginning days for any contract are important so as to ensure the best start with the maximum number of participants and volume of trade.’
The $500 billion steel market lacks a transparent global benchmark for setting prices or hedging risk.
‘The exchange so far has received good responses from banks and funds, but the key steel players in the market are still suspicious about it,’ a Dubai-steel producer said.
‘They still need some time in order to make sure that those players will trade the contract.’
The DGCX is banking on demand from the construction industry in the world’s biggest oil exporting region where more that $1 trillion worth of infrastructure projects are in the pipeline.
Futures contracts would allow steelmakers and their customers to reduce risk by locking in prices.
Openly traded futures would also allow financial market speculators to bet on whether steel prices rise or fall, just as they do in base metals, energy, currencies and stock markets.
The Dubai steel contract will be for reinforcing bar (rebar), used in construction. It is the first of four contracts targeted to the steel supply chain that the DGCX plans to issue.
The three others are for stainless steel, flat products and freight, but are not slated to start trading for at least 18-24 months, the exchange has said.
The rebar contract will be accessible to international investors, unlike steel contracts in India and China, which are only for domestic market participants. Source
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