(Commonwealth_ The establishment of good delivery standards has been a pivotal development in global commodity markets, ensuring the quality of traded goods and fostering confidence among buyers and sellers. The concept originated with the Bank of London’s London Good Delivery List, which recognized gold bars from specific refiners that met stringent quality standards. Over time, this concept has become central to organized commodity markets, with major exchanges like the London Metal Exchange (LME), CME Group, COMEX, NYMEX, and the Shanghai Futures Exchange (SHFE) adopting similar standards.
In India, commodity exchanges have played a commendable role since their inception in 2003. They have introduced world-class IT-enabled trading platforms, seamless trade clearing and margining systems, and advanced warehousing and quality assessment mechanisms. These exchanges have also educated stakeholders on mitigating price risks through exchange-traded derivatives contracts. However, for base metals like copper, aluminum, nickel, zinc, and lead, Indian exchanges have historically depended on LME standards for deliveries.
This reliance on LME posed significant challenges. The LME’s empanelment process for recognizing companies was expensive, time-consuming, and often restrictive. As a result, only a few Indian companies were able to participate, limiting the capacity of domestic players to use Indian exchange platforms for delivering base metals.
Introduction to India’s Good Delivery Standards
In 2020, a transformative step was undertaken to address these limitations. Aligning with the Government of India’s Atmanirbhar Bharat (Self-reliant India) initiative, the Multi Commodity Exchange of India (MCX) introduced the India Good Delivery Standards (IGDS) by adopting specifications set by the Bureau of Indian Standards (BIS). The aim of this move was to tailor delivery standards to the Indian market, thereby reducing dependence on global benchmarks like LME.
Using IGDS, MCX began empaneling domestic lead recyclers, marking a significant milestone for the Indian commodities market. MCX empanelled several major secondary lead recyclers between 2020 and 2024, including Pilot Industries, Gravita India, Eswari Global, Jayachandra Alloys, and Ardee Industries. Notably, in February 2022, Pilot Industries’ Bhiwadi plant and Gravita India’s Chittoor plant produced lead that became the first to qualify under MCX’s standards.
The Rise of Domestic Participation
India is the world’s largest importer of lead scrap, with 673 registered lead recyclers, yet it remains a marginal player in primary lead production. Empaneling domestic recyclers through MCX has opened opportunities for these smaller players to participate actively in the market. This initiative has enabled greater domestic lead deliveries through Indian exchanges. The MCX platform delivered 51,000 tons of lead between 2019 and 2024, including a record 2,725 tons in March 2022 alone.
In addition to increasing deliveries, the correlation between LME and MCX spot prices for lead has shifted significantly. Before empanelment, the correlation was 84%, indicating strong reliance on LME prices. Following empanelment, the correlation decreased to 58%, demonstrating a greater alignment between domestic prices and local supply-demand dynamics. This development marks the emergence of an “India price of lead,” moving the market away from exclusive dependence on global price benchmarks.
Higher standards for quality and delivery
The MCX standards for lead differ from LME and CME requirements in key aspects. While LME and CME mandate a minimum lead purity of 99.97%, MCX requires a higher purity of 99.98%. Additionally, the lot size for MCX contracts is 5 metric tons, compared to 25 metric tons for LME and CME. These adjustments cater to the specific needs of the Indian market and support smaller players who may not operate on a global scale.
Empowering Domestic Markets
The empanelment of domestic refiners under MCX has brought numerous benefits to the Indian lead market. It has provided small and medium-scale players with a platform to hedge price risks while encouraging the development of a robust domestic ecosystem. Even though large producers like Hindustan Zinc Ltd., Jain Resource Recycling Private Ltd., and Pondy Oxides and Chemicals Ltd. remain empaneled with LME and CME, the MCX initiative has created new opportunities for smaller domestic recyclers.
