Steel futures contract will help reduce building costs

Dubai: The launch of the forthcoming Dubai Steel Futures contract will enable building contractors in the UAE and the surrounding region to reduce costs in construction projects, said a top official.

"The current construction boom in the UAE necessitates the crucial need for developers to have a regular supply of steel at standardised prices.

"The volatility of spot steel prices can create cost over runs, thereby affecting the viability of a construction project," said Dr David Rutledge, Chief Executive Officer, Dubai Multi Commodities Centre (DMCC).

Steel producers, traders, contractors and end users would be able to better manage their price risk leading to improved price discovery for steel in the region, he said.

DMCC has developed a steel futures contract to be launched for trade on the Dubai Gold and Commodities Exchange (DGCX) in early 2007.

The contract unit for the Dubai Domestic Steel Contract is 10 metric tonnes of steel rebar, produced by an approved producer, accompanied by MTC.

The minimum price fluctuation has been set at $0.10 per metric tonne with deliveries to be made by wWarehouse receipts at approved warehouses in Dubai.

Dr Rutledge added futures contracts would enable all stakeholders including steel producers, traders, stockists and contractors to lock in prices 6 to 12 months in advance.

This would help increase the predictability of their cash flows and gain improved access to finance.