The National Stock Exchange of India (NSE) has signed a Memorandum of Understanding (MoU) with the Steel Users Federation of India (SUFI) to collaborate on developing the steel and commodity derivatives ecosystem in the country. This partnership aims to establish a transparent price-risk management framework, helping domestic businesses hedge against market volatility. The initiative comes at a critical juncture as India’s crude steel production continues its upward trajectory, increasing by nearly 11% year-on-year to 168.4 million tonnes (MT) in the financial year 2025-26.
Developing the Steel and Commodity Derivatives Ecosystem
A commodity derivatives ecosystem consists of standardized financial contracts, such as futures and options, that derive their value from underlying physical commodities like steel, copper, or agricultural goods. In India, the trading of these financial instruments is regulated by the Securities and Exchange Board of India (SEBI). SEBI, which was established in 1988 and granted statutory powers in 1992 under the SEBI Act, 1992, is headquartered in Mumbai. The regulator took over the oversight of commodity derivatives in 2015 following the merger of the Forward Markets Commission (FMC) with SEBI.
For the industrial sector, particularly steel manufacturers and users, commodity derivatives serve as a vital risk-mitigation tool. Steel prices are highly sensitive to global supply chain disruptions, geopolitical shifts, and raw material cost fluctuations. By using exchange-traded derivatives, businesses can lock in prices for future purchases or sales. This hedging mechanism protects their profit margins from sudden, adverse price swings, enabling more stable financial planning.
Understanding the NSE-SUFI Collaboration
The collaboration between the National Stock Exchange of India and the Steel Users Federation of India represents a structured effort to bridge the financial markets and the physical steel industry. The NSE, incorporated in 1992 and headquartered in Mumbai, operates under the leadership of its Managing Director and Chief Executive Officer, Ashishkumar Chauhan. SUFI, established in 2015 with its headquarters also in Mumbai, is a premier trade body representing steel users across the country under the presidency of its founder, Nikunj Turakhia.
Key Objectives of the MoU
The primary objective of the agreement is to jointly design, develop, and promote exchange-traded commodity derivative products tailored for the steel industry. To achieve this, the two entities will collaborate on product development, ensuring that new contracts reflect market requirements and comply with regulatory norms.
In addition, the partnership will prioritize market outreach and educational campaigns. The NSE and SUFI plan to conduct regular industry consultations, workshops, and training programs to educate market participants on how to utilize derivatives for effective hedging.
Targeted Stakeholders and Value Chain
The initiatives under this agreement are designed to support various participants across the steel supply chain:
| Stakeholder Group | Role and Benefit |
|---|---|
| Steel Producers & Processors | Primary manufacturers can hedge raw material and finished product prices. |
| MSMEs | Micro, Small, and Medium Enterprises gain access to affordable risk management tools. |
| Infrastructure & OEMs | Large project developers and Original Equipment Manufacturers can stabilize procurement costs. |
| Capital Goods Firms | Equipment builders can manage long-term input price fluctuations. |
India’s Steel Production Landscape
India is the second-largest producer of crude steel globally, trailing only China. The sector serves as a crucial pillar for the nation’s industrial development. In the financial year 2025-26, India’s crude steel production reached 168.4 million tonnes, representing a year-on-year growth of nearly 11%. This rapid expansion reflects strong domestic demand across key development sectors.
Achieving the 300 MT Target by 2030
To support long-term industrialization, the domestic steel sector is working to scale up its operations. The production capacity is projected to reach 300 million tonnes by 2030. This growth path involves substantial investments in both new facilities (greenfield projects) and the expansion of existing plants (brownfield projects). The infrastructure push, railway modernization, urban housing projects, and automobile manufacturing are the primary drivers of this capacity expansion.
The National Steel Policy 2017
The long-term development of the sector is guided by the National Steel Policy 2017, which was formulated by the Ministry of Steel. The policy sets clear benchmarks to be achieved by the year 2030-31:
- A total crude steel capacity of 300 million tonnes
- A crude steel production level of 255 million tonnes
- An increase in per capita steel consumption to 160 kilograms
To realize these goals, the policy emphasizes resource security, including reducing dependence on imported coking coal and securing domestic iron ore supplies. It also supports technology upgradation through initiatives such as the Production Linked Incentive (PLI) scheme for specialty steel and promotes the development of sustainable, low-carbon steel production processes.
Strategic Importance of Steel Derivatives
As India scales up its steel capacity to meet the demands of rapid urbanization and infrastructure building, managing input price risk becomes crucial. Steel manufacturing and consumption are capital-intensive operations that require months of planning. During this period, fluctuations in the prices of iron ore, coking coal, and finished steel products can significantly alter the profitability of projects.
For small and medium enterprises, which operate on thin margins, sudden price shocks can disrupt business operations. Standardized, exchange-traded derivatives offer a transparent and accessible hedging platform for these entities. By utilizing futures and options, steel consumers can lock in their raw material procurement costs well in advance. This helps in budgeting for major infrastructure projects, minimizing the threat of cost overruns, and enhancing the overall competitiveness of the Indian manufacturing sector.
Key Takeaways
- The National Stock Exchange of India (NSE) and the Steel Users Federation of India (SUFI) signed a Memorandum of Understanding on May 27, 2026, to develop the steel and commodity derivatives ecosystem.
- The National Stock Exchange of India was incorporated in 1992 and is headquartered in Mumbai under the current Managing Director and CEO Ashishkumar Chauhan.
- The Steel Users Federation of India was established in 2015 with its headquarters in Mumbai under the leadership of founder president Nikunj Turakhia.
- The Securities and Exchange Board of India (SEBI), which regulates the commodity derivatives market, was established in 1988 and became a statutory body through the SEBI Act, 1992.
- India’s crude steel production grew by nearly 11% year-on-year to reach 168.4 million tonnes during the financial year 2025-26.
- The National Steel Policy 2017, formulated by the Ministry of Steel, sets a target to achieve a crude steel capacity of 300 million tonnes and production of 255 million tonnes by 2030-31.
