EghtesadOnline: After offering cement in the spot market for the first time in May, the Iran Mercantile Exchange plans to launch cement-based certificate of deposits (CD) for retailers.
In a talk with IRIB, Alireza Naser-Pour, the IME deputy head for market development, said cement so far is traded wholesale in the commodity market.
“To enable retail buyers to participate in cement trade, cement-based CDs will become operational this week,” he was quoted as saying.
IME is a commodities exchange in Tehran founded in 2006 to handle deals in farm, industrial and petrochemical products in the spot and futures markets.
A commodity-based CD is a security indicating ownership of the holder of a particular commodity supported by standard warehouse receipt issued by the warehouse and certified by the Securities and Exchange Organization, the capital market regulator.
Selling a CD in the primary market means selling the stored or deposited commodity by the owner, and buying it means buying of such commodity. CDs securitize a company’s product inventory and offer buyers easy ownership of goods without the usual hassles of storage and insurance.
Naser-Pour said retail buyers have shown interest in cement trade and a number of listed cement factories have applied to register their warehouses with the IME, paving the way for CDs.
The official, however, noted that cement offer to retail traders is optional and manufacturers operating in the IME have no obligation to engage in retail trade. CD prices, he said, will be the function of price changes in the spot market.
As for minimum volume of cement to be sold to retail buyers, he said the minimum would be 10 tons but listed cement makers can process lower volumes subject to their own terms and conditions.
He predicted that cement-based CDs could constitute 30% of the total cement trade via the IME in the near future.
Earlier in the month, the Industries Ministry obliged all cement factories to sell their products only via the IME.
Iran’s cement production capacity is 85 million tons, of which 65 million tons are consumed domestically, produced by 76 major companies.