The Indian Commodity Exchange and Multi Commodity Exchange both launched physically settled iron ore futures at the end of January, after gaining permission from India’s Forward Markets Commission.

They are the world’s first such contracts. Singapore Mercantile Exchange launched iron ore price index futures last September, based on Metal Bulletin’s Iron Ore Index, but they are cash-settled.

The Indian contracts share some terms in common. The underlying is 62% fines iron ore, with a trading unit of 100 dry metric tonnes, quoted in rupees/tonne. The initial minimum margin is 8%, and expiries are monthly.

There are some differences. At Icex, the tick size is Rp0.50/dmt. The price quote will be cost and freight China port, with main delivery centres at Ennore Port and Vizag near Chennai, Haldia near Kolkata and Paradip in Orissa.

Delivery unit is 5,000 dmt with a tolerance limit of +/-10%. The maximum allowed open position for individual clients is 75,000 dmt.

Each member’s maximum allowable open position for all its clients is 15% of open interest or 375,000 dmt for all iron ore contracts together.

At MCX the tick size is Rp1/dmt and delivery unit is 20,000 dmt +/- 10%. Price is quoted free on board Chennai. The position limit is 1m dmt per client and for members, aggregating all clients, the higher of 3m dmt or 15% of open interest.

The due date price is calculated on the last trading day, based on average domestic spot prices in the contract month.

India is the world’s third largest iron ore producer, pushing out 257m tonnes last year, of which 115m were exported.