NCDEX launches India's first steel scrap futures contract to help industry hedge price risks

The National Commodity and Derivatives Exchange (NCDEX) has launched India's first steel scrap futures contract based on a Price Reporting Agency (PRA), providing steelmakers, scrap traders and downstream producers with an organised mechanism to hedge raw material price risks.

The contract, based on Heavy Melting Scrap (HMS) 80:20, seeks to address the absence of a credible market-linked benchmark and an organised hedging mechanism in India's fragmented steel scrap market, where prices vary across regions and grades.

HMS 80:20 comprises 80% Heavy Melting Scrap Grade 1 and 20% Heavy Melting Scrap Grade 2. It is among the most widely referenced scrap grades in international markets and serves as a benchmark import grade across Asian markets.


The launch follows a memorandum of understanding (MoU) between NCDEX and BigMint Technologies Private Limited, under which BigMint will act as the price reference agency for the contract. The partnership brings together NCDEX's derivatives market infrastructure and BigMint's commodity price assessment expertise.

The contract has a trading unit of 10 metric tonnes (MT), a maximum order size of 500 MT and a tick size of Rs 10 per MT. It will be cash-settled, with Mandi Gobindgarh in Punjab as the basis centre, exclusive of GST.

"Steel scrap is an increasingly important component of India's steel value chain, particularly as the industry advances towards more resource-efficient and sustainable manufacturing practices. Yet its price risk has had no exchange-traded answer," said Vikas Goel, MD and CEO of NCDEX.

By introducing India's first PRA-based futures contract in steel scrap and bringing in global standards of data and governance following an IOSCO-compliant framework, NCDEX is addressing this gap, he added.

Steel scrap generation rises as imports decline

India is the world's second-largest crude steel producer, with production growing 10.7% year-on-year to around 168.4 million tonnes during April-March 2025-26, according to World Steel Association data cited by NCDEX. This compares with an approximately 2% decline in global crude steel production during the year.

Domestic steel scrap generation increased 22% year-on-year to 32 million tonnes, while ferrous scrap imports declined 20%, according to the exchange.

Kedar Deshpande, Chief Business Officer of NCDEX, said the domestic steel scrap market remains fragmented, with prices varying across regions and grades.

The futures contract, anchored to BigMint's established HMS 80:20 price assessment, aims to improve price discovery and provide market participants with an organised avenue to hedge price risks, he said.

Deshpande added that the contract could support steel clusters across Delhi-NCR, Punjab, Rajasthan, Gujarat, Maharashtra, West Bengal, Chhattisgarh, Odisha and Tamil Nadu by helping market participants manage price volatility.

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Scrap futures contract to benefit steel value chain

The steel scrap futures contract is designed to serve participants across the broader steel value chain, including steelmakers, billet and wire rod manufacturers, traders and sponge iron producers.

According to BigMint data, HMS 80:20 prices have a 90% correlation with billet prices and an 89% correlation with wire rod prices.

This price relationship could allow multiple participants to use a single futures contract to manage price exposure.

Steelmakers can buy futures contracts to lock in scrap costs ahead of physical purchases. Billet and wire rod manufacturers and traders can sell futures to offset part of a potential decline in prices before selling their products. Sponge iron producers can also use the contract to hedge against price declines.

Steel scrap is a key input in low-carbon steelmaking and supports the circular economy by enabling the reuse of steel. Its use also reduces the carbon footprint compared with the Blast Furnace-Basic Oxygen Furnace (BF-BOF) production route.

Disclosure: This article has been written by Kumar Gaurav, who is not a Sebi-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective Sebi-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here