IME Quarterly Newsletter (Fall 2015)

IME

QuarterlyIran Mercantile Exchange Quarterly Newsletter Fall 2015 , Vol. 2

IN THE NAME OF GOD 5 Editor’s Post 6 CEO’s Post 8 Introduction to IME 10 General News 12 IME CEO Awarded at the International PR Symposium 12 IME and the Capital Market in the Post-sanction Economy 13 Investment Banks Briefed on IME Developmental Plans 14 International Relations and Events 16 IME Attends 21st FEAS AGM in Isfahan 16 IME Invited to the SSE Global Dialogue Forum 17 IME-ICIS Collaboration on Publishing Polymer Prices 17 IME Holds Webinar on Currency Derivatives with KRX 17 The Greece and Turkey Financial Market Delegates Visit IME 18 A Visit of the Russian Sort 18 IME Attends 11th CFA International Derivatives Forum 19 Foreign Exchange Futures Market 20 The Necessity of Establishing Foreign Currency Futures Contract 22 The Launch of the Currency Exchange Without Having to Lift Sanctions or Having Unified Exchange Rate 24 Central Banks Interventions in FX Markets 28 Markets 30 Petrochemical Market 32 IME-NIPC Close Relations: A Symbol of Cooperation between the Production and Trade Sectors 33 Trading of PVC Standard Salam Contracts in IME 34 Metals and Minerals 36 26 Million USD, Trading Value of the Iron Ore Standard 36 IME Financial Services to the Steel Industry 37 B2X; an Approach to Curtail Production-Consumption Intervals 38 Agricultural 40 The Article 33, Booster of Agricultural Trades in IME 42 Top Suppliers in IME 44 Esfahan Mobarakeh Steel Company 46 Jey Oil Refining Company 48 Statistics IME Quarterly Iran Mercantile Exchange Quarterly Newsletter Fall 2015 , Vol. 2 Publisher: Iran Mercantile Exchange (IME) Adviser: Dr. Hamed Soltaninejad IME COE Editorial board: Mohammad Reza Tahmasbi, Zahra Rahmati, Nima Rajabi, Amin Najari Design: Mohsen Hadi, Nima Rajabi No 351, Taleghani St, Vali Asr Ave, Tehran, Iran Tel: +98(21)8564000-2 International Relation Dept: +98(21)8541024-29 www.ime.co.ir Email: [email protected] IME 4 Quarterly Fall 2015 , Vol.2 s we are our impressive operation approaching the brought about brilliant ANew Year’s Eve outcomes. Gains have and autumn is nearing been remarkable enough its end, I would like to to be considered as the take the opportunity to solid evidence for us recap the exciting past having accomplished our three months of the IME mission successfully as the activities in collaboration dedicated provider of with the domestic and the modern and efficient international stakeholders trading infrastructures. and partners in the It is gratifying that the framework of the second global financial and edition of the IME commodity industries’ Quarterly. The January willingness to invest in issue of the IME’s bulletin the IME contracts and is comprised of three transactions has taken parts: general news, a positive turn during international events and this period. Given that market developments most of the sanctions will and financial instruments. have been lifted by that time, we expect this to During the past quarter continue into 2016.

IME Fall 2015 , Vol.2 Quarterly 5 IME, in the Direction of Development, Prepared to Collaborate with International Market Players

n image of the in direction of financial establishment of the Earth was recently markets development, currency exchange has Areleased on social bolstering the financial been approved by the networks drawing each markets as its first priority. High Council of Exchange world country as big as Due to the trading and the required the size of its financial infrastructures of the trading infrastructure market. The idea of the IME in the physical has been developed; illustrator suggested how market as well as the and it is planned to be amazingly the size of a economic advantages opened after making the country varied when and potentials of the necessary coordination compared to the financial Islamic Republic of Iran, with the Central Bank. size as a measure. the development of the Interestingly, by this financial market in the As the country measure, small countries areas of petrochemical approaches to the lifting who enjoyed a large and petroleum products of sanctions, economic financial market turned has been put on openness and facilitation out to become even the agenda of the of international trade, larger than geographical exchange. Financial the IME works out plans large countries. Today, market development, to expand its activities countries endeavor to especially in asphalt and at international level. achieve a proper position petrochemical products Development and in the world’s economy can open a new avenue expansion of the export through expansion of for the participation of trading floor (Export Ring) the financial markets. In international players in of the IME, aimed at other words, the financial Iran Mercantile Exchange. boosting trade through markets will manifest the promoting the fringe power of the countries In addition to the benefits of trading in the in the near future. Due expansion of the IME, can be highlighted to this necessity and financial market of the among the priorities in the owing to the worldwide petrochemical and post-sanction era. movement towards petroleum products, the expanding the financial launch of the currency Financing exports through markets, Iran Mercantile futures exchange international finance Exchange has crafted its will be realized in this institutions, international future development plan period. At present, the marketing specially in the

IME 6 Quarterly Fall 2015 , Vol.2 field of petrochemical products, as well as using the worldwide network of warehouses in order to use commodity certificate of deposit and warehouse warrant systems are also projects through which the foreign trade of Iran will be promoted relying on the quality of Iranian products and brands; to this end, important steps will be taken in the future. Dr. Hamed Soltaninejad Iran Mercantile the IME CEO Exchange, in the new era of its economic activity, is highly interested in constructive interaction with the economic agents of states, financial institutions, commodity exchanges, businesses, traders and economic players of countries around the world; and to this effect, firmly supports cooperation and warmly welcomes collaborative and durable economic relations.

IME Fall 2015 , Vol.2 Quarterly 7 IME, Driving National Trade and Development

aunched in 2007 by in the spot market and commitment to the merger of metal hedge or gain profit by providing innovative Land agriculture accepting risk in the financial tools and risk- commodity exchanges, derivatives market. management solutions Iran Mercantile Exchange to the marketplace, Iran has developed to The IME Export Trading Mercantile Exchange the leading and most Floor (Export Ring) in also offers a wide array transparent and diverse the Persian Gulf offers of exchange-cleared spot and derivatives the worldwide traders instruments like futures, marketplace in the and end users the parallel and standard MENA region handling, widest range of global Salam, commodity on average, 25 million benchmark products certificate of deposit and tonnes of all asset across all major asset warrants. The exchange classes from industrial classes, including asphalt is planning to launch to petrochemical and and bitumen grades currency futures as its petroleum as well as as petroleum products, flagship derivatives agriculture products iron ore and minerals as contract in the very near worth approximately well as chemicals and future. 14 billion USD annually. polymers. The prices The company provides of the export ring are The IME clearing house a trading platform quoted as reference renders spot and for buyers and sellers, by the renowned derivatives clearing and bringing together international price risk management services industries, trade and vendors and publishers through electronic platform economic sectors, including Argus, ICIS and acting as the counterparty individuals, companies Metal Bulletin. to every trade to protect and institutions that trade the market integrity against physical commodities As part of the exchange third-party credit risks.

IME 8 Quarterly Fall 2015 , Vol.2 Photo: S.Faraji Fall 2015,Vol.2 Quarterly IME 9 Photo: S.Faraji

IME and the Capital Market in the Post-sanction Economy

he Post-sanction Economy Confer- ence, held in November in the Persian TGulf resort of Kish Island, was attended by the capital market entities and institutions in order to explore solutions to boost the national economy in the post-sanction era. During the forum Dr. SoltaniNejad touched upon various issues including the foreign investment and stressed the need to have more diversified risk management and hedging tools to safeguard the inves- the IME on the 11th International Symposium of Public Relations tors against volatilities in the market.

IME CEO Awarded at the The IME CEO maintained that since the exchanges are organized markets and International PR Symposium operate in compliance with the rules and he eleventh edition of the Internation- regulations, they are al Public Relations Symposium recog- considered by the for- Tnized the IME CEO among the best eign investors as the PR-friendly Business Leaders of Iran. During first choice of invest- the awarding ceremony held at Niroo Re- ment after easing the search Institute on December 15 in Tehran, sanctions, so the au- Dr. Hamed SoltaniNejad, CEO of Iran Mer- thorities should in no cantile Exchange, was praised and named time pave the ground by the jury as one of the top 7 communi- to link the real econ- cation and PR-centered managers across omy to the financial The Role of the IME in the nation. proper interaction with domes- International Financial Markets in market in order to lure tic and foreign media, interactive working Post-Sanction Era foreign investors. He »»Reputed relations with the staff »»Iran is a large stressed that launch- international PR gurus and supporting the market with a ing the currency deriv- from Iran, Italy, Spain, PR division and com- young, educated atives platform should Hungary and the munication-orient- population, be high on the agen- Netherlands voted in ed character were relatively high per da in order to attract favor of the IME CEO among the key fea- capita income and the overseas inves- to win the Award tures of the IME CEO great technical tors who would like to to fit the criteria and win the title in view of and absorptive benefit from the op- the electing jury comprised of the distin- Capacities portunities laid in Iran’s guished international PR leaders and key- economy and to protect them in market note lecturers from Iran, Italy, Spain, Hunga- uncertainties. Elsewhere in his remarks Sol- ry and the Netherlands. taniNejad referred to the IME role in the Economy of Resistance and the capacities and infrastructures of the commodity exchange for sound price discovery of the strategic commodities in different sectors, not to mention the export.

IME 12 Quarterly Fall 2015 , Vol.2 en.ime.co.ir

Investment Banks Briefed on IME Developmental Plans

group of the Iranian investment banks’ representatives met with ADr. SoltaniNejad, the IME CEO, and his team at the headquarters of the exchange. The purpose of the meeting was to mainly enlighten the attendees as with the future developmental plans of the IME. The meeting had two sections; the first section included a concise presentation from the IME side and the second section covered the attendees’ questions and IME’s answers. The capital market gusts were presented on topics varying from securitization, Salam transactions, foreign currency futures contracts, certificates of deposit, warehouse receipts, warrants and other fi- CEO of the IME in the Seminar of Post-Sanction Iran’s e conomy nancials.

»»Investment banks is a financial institution that assists individuals, corporations, and governments in raising financial capital by underwriting or acting as the client’s agent in the issuance of securities (or both). An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, and FICC services (fixed income instruments, currencies, and commodities)

IME Fall 2015 , Vol.2 Quarterly 13 IME Photo: S.Faraji 14 Quarterly Fall 2015 , Vol.2 IME Fall 2015 , Vol.2 Quarterly 15 IME Delegates Appear in FEAS Annual Meeting Delegates from Global Investment Holding Paid a Visit to the IME IME Attends 21st FEAS AGM in Isfahan IME Invited to the SSE Global Dialogue Forum he 21st annual general meeting of the FEAS members was held from 17-18 of he Sustainable Stock Exchanges is a TNovember in Isfahan. The event was United Nations UNCTAD initiative aimed organized by the Tehran Stock Exchange Tat exploring how exchanges can work and the FEAS Secretariat. IME took part together with their investors, regulators, in the gathering in a delegation presided and companies to enhance corporate by Dr. SoltaniNejad, the IME CEO. A wide transparency, and ultimately performance scope of items including market surveil- on ESG (environmental, social and corpo- lance, regulation with an approach to rate governance) issues and encourage new financial market rules in the EU, inves- responsible long-term approaches to in- tor relations and a review of exchange an- vestment. Following the introduction of the alytics and financials was discussed in the SSE initiative in the FEAS meeting in Isfahan, Working Committee session. The Executive the IME wrote to the UN SSE headquarter in Board and General Assembly focused on Geneva in order to inform them of the IME developing a multi-year strategy of the enthusiasm for joining the initiative. To this Federation in further assisting the members effect, the UN affiliated office welcomed along with discussing executive and finan- the IME’s aspirations and invited Iran Mer- cial elements of the FEAS business. Among cantile Exchange to participate as the first the highlights of the meeting there was a commodity exchange in the next edition of plan developed by the Working Commit- the Global Dialogue, the flagship event of tee and Secretariat to launch an invest- the project, to be convened as of Septem- ment networking platform to include all ber 2016 in Singapore. Among SSE partner participants of the FEAS member’s capital exchanges it can be referred to Borsa Istan- markets from exchanges, brokers, traders, bul, Bombay Stock Exchange, the Colom- investment banks through to the SMEs. bian Securities Exchange, Deutsche Borse, During the GA, the members welcomed the Jamaica Stock Exchange, the Johan- Cyprus Stock Exchange as a full member nesburg Stock Exchange, the Egyptian Ex- and European Bank of Reconstruction and change, the Kazakhstan Stock Exchange, Development (EBRD) as an affiliate mem- the London Stock Exchange Group, the ber. Such additions highlight the inclusive Mexican Exchange, Nasdaq, the New York role of the Federation which is filling a gap Stock Exchange, the Stock Exchange of for development of small to medium-size Thailand and the Warsaw Stock Exchange. markets in the Eurasia region. The members will convene in Bucharest, Romania for the Spring Meetings in May, 2016 and in Mana- ma, Bahrain for the Annual Meetings in fall 2016.

IME 16 Quarterly Fall 2015 , Vol.2 International Relations and Events

IME-ICIS Collaboration on Publishing various issues pertaining to the currency fu- Polymer Prices tures contracts ranging from licenses, cur- ran Mercantile Exchange and the ICIS, rency spot market drivers and participant, the world largest publisher of the petro- contract specifications, margining and risk Ichemical markets analyses and prices, management strategies and algorithms, opened a new chapter of cooperation in market liquidity and participants and the the plastics market of the Middle East.The status of foreign investors, final settlement historic data transmission deal was clinched and post trade including delivery of the in a meeting held at the IME headquarter in underlying asset were discussed by the IME Tehran attended by the IME, ICIS and JPC and KRX senior derivatives officials and ex- officials. Based on the agreement, the ICIS perts. Both exchanges are due to further will publish the prices of the petrochemical relations under auspices of SEO-KRX MoU and polymeric products traded on the IME with the IME-KRX training workshop on de- platform as market reference in a timely rivatives in Busan or Tehran on the calen- and continuous manner. Seamless market dar. transparency and liquidity as well as sound price discovery mechanism based on supply and demand shaped the core of the ICIS market assessment and final judgment in embracing the trading data of the IME, the most diversified commodity market of the region. the IME has started transmission of the closing prices of Polyethylene, as the first designated commodity, to ICIS as of December 16 on a weekly basis. The prices of the IME are being quoted in the Asia-Pa- Delegates from Global Investment cific episode of ICIS Pricing Bulletin. Holding Paid a Visit to the IME The Greece and Turkey Financial Market Delegates Visit IME

he representative of the capital markets of the Greece and Turkey met with Tthe IME senior officials in separate meetings. Throughout the meetings the delega- tions were briefed on the role and position of IME in the Iranian capital market and the two sides explored possible avenues for the international partnership and linkage of the the IME Holds Webinar on Currency Derivatives with KRX capital markets of their capital markets. The IME Holds Webinar on Currency Greece capital market delegation vowed Derivatives with KRX at the amazing volume of the commodity ollowing the signing of MoU between market transactions in the IME and called the Securities and Exchange Organiza- for mutual collaboration to launch a com- Ftion of Iran (capital market regulator) modity exchange in Athena.The Turkish and the Korea Exchange in Tehran, Iran side, the Global Investment Holding, being Mercantile Exchange organized a webinar a founding member of Borsa istanbul and and conference call with its Korean coun- TakasBank, called for developing trading terpart focused on commodity and curren- relations with the IME as a structured com- cy derivatives. During the virtual meeting modity market.

IME Fall 2015 , Vol.2 Quarterly 17 A Visit of the Russian Sort IME Attends 11th CFA International Derivatives Forum he IME hosted in December a special guest from the Russian FX market, the he IME delegates participated in 11th TAlpari, a Saint Petersburg-domiciled China Futures Association’s Internation- operator of FX market with branches in Tal Derivatives Forum, in Shenzhen.The Moscow, Europe and Mauritius. Accord- major theme of the conference was about ing to Sergey Vyazmin, the Alpari Global internationalization of RMB as a reserve cur- Business Manager, the Russian platform rency and all the aspects around such a big provide access to the fx market for the do- achievement to be fulfilled from economic mestic and international traders through affairs to back-office and IT support. From Metatrader. The meeting aimed at how Chinese participants, Mr.Yin Zhongqing de- IME could benefit from Alpari experiences livered a very interesting lecture targeting in launching the currency futures market. social and political goals, incentives and Both sides shared view on the importance infrastructure for RMB internationalization of launching a currency market collocat- through global scale future contracts and ed with the commodity business for the legislative perspectives of it. On the tech- presence of foreign as well as domestic nical hand, Mr. Leo Melamed, the pioneer investors. Launching a Ruble-IRR currency figure in IMM (International Money Market) trading platform was among the highlights who has been serving as chairman of CME of the meeting proposed by the IME CEO group for long years, throw a lecture on Senior Advisor as a solution to stimulate his experiences about the impact of de- more trade leads between the two coun- rivatives the impact market on US econo- tries and to abandon the USD in the mutual my. For the IME, the experience made by trade which was welcomed by the Russian Chinese counterpart is crucially important firm and promised to pursue the idea with when taking first steps in inauguration of a the Russian exchanges on establishment of dedicated market under IME for currency such a necessary instrument. futures contacts to gain benefits and avoid pitfalls aiming towards better efficiency for the economic atmosphere of Iran

IME 18 Quarterly Fall 2015 , Vol.2 IME Fall 2015 , Vol.2 Quarterly 19 Foreign Exchange Futures Market The Necessity of Establishing Foreign Currency Futures Contract Selling and purchasing future will become among countries has commodities, trading more difficult and due been remarkable than financial assets, direct to incorrect prediction ever before. In this investments and all and probable costs, in situation, the currency economic decisions, will some cases, plenty of rate being conversion depend on prediction economic actors might of domestic and foreign and expectations of not be willing to take prices, will play the future prices. Future prices any decision: leading to significant role in decision are not predictable; recession. The incidence making of economic however, everyone and persistence of these actors particularly decides based on his conditions will impose those who have expected future price, exorbitant costs on international exposures and concerns about country’s economy such and interactions. For probable conflict as failure, or at least instance, a foreign between what he reduction in investment investor seeking to invest expects and what and economic growth in in real or financial market truly will happen. As the future. of another country, will far as the instability consider the currency and uncertainty are Currently, development rate and its expected increasing in economy of economic, financial changes as key factors cycle, predicting the and trade relations in his decisions, whereas

IME 20 Quarterly Fall 2015 , Vol.2 weakness of the national India have introduced fluctuations, in the law of currency of the investee currency rate hedging Competitive Production country will affect the instruments, over the Barriers Removal, and investor’s expected profit. three past decades. has obliged the Ministry of Economic Affairs and Fluctuations in currency Unfortunately, Iran’s Finance to prepare rate will cause economy, despite regulations to cover autonomous volatility sharp fluctuations in currency rate fluctuations in products foreign exchange rates, has in cooperation with prices, domestic prices not any hedging tools Central Bank of Iran, The of services and assets as to manage currency Securities and Exchange well as foreign assets and price movements. This Organization and Central services costs. Thus, the condition will result Insurance of Iran. currency rate fluctuation in an extreme rise in is a key factor affecting investment risk for the The currency Futures economic decisions and foreign investors in the contracts which are its costs through creating real and financial markets popular instruments to volatility in prices. of Iran and will take away cover the risk of currency incentives to enter Iran’s rate fluctuations were After the collapse of the market. Whereas, in the presented for the first Bretton Woods System general policies of Islamic time by CME. Also, in Iran, in 1973 and changing Republic of Iran, it has IME, being successful to the fixed rate foreign been highly focused on establish and implement exchange currencies luring foreign investments Gold Coin futures, has the system into a floating rate (The Resistance required infrastructures system, the fluctuations Economy general and enough experience in currency rates rose policies; paragraph 10, to launch the currency sharply. the general policies of futures. National Production, Fluctuations in currency Supporting Iranian The currency futures, rates made it difficult Capital and Labor; the main and most to forecast future rates Paragraph 17 and the important function of and led to increases in general policies of which is to cover currency the cost of international encouraging investment; rate fluctuations, gives economic, trade and paragraph 8&9). On foreign investors and finance activities. In the other hand, lack of domestic economic this condition, Chicago these tools has increased actors the possibility to Mercantile Exchange the dramatically the cost act freely regardless (CME), for the first time, of domestic economic of the currency rate provided hedging tools actors, and in some cases fluctuations. Establishing for the foreigh though has led to the closure of the currency futures introducing currency firms and bankruptcy. exchange will facilitate futures contracts. In foreign investment in Iran order to attract foreign Fortunately, the eleventh and will deepen and investments and to government of Iran has internationalize the capital reduce transaction paid attention to this market of the country. In costs, some developing essential need of Iran’s addition, foreign direct countries such as Mexico, economy, the financial investment (FDI) in the real South Korea, Brazil, instruments to cover sector of the economy will Turkey, South Africa and the risk of currency rate be expanded.

IME Fall 2015 , Vol.2 Quarterly 21 The Launch of the Currency Exchange without Having to Lift Sanctions or Having Unified Exchange Rate

here are two the establishment. The normally intervene in approaches to the basis for this approach the currency derivatives Tformation of Currency is the formation of the markets. Futures Exchange (CFE) in CFEs in other countries Iran. In the first approach, because the formation In the second approach, the formation of the CFE of the currency spot the CFE can be is dependent on (subject markets precedes the established even in the to) the lifting of sanctions, formation of the currency current situation of the unification of the derivative markets in two-tiered currency exchange rate and re- terms of time sequence. regime, and without re- opening of the interbank In this context, foreign opening of the interbank currency market. In other currency derivatives market. In addition, the words, in the case of non- are established under formation of this market realization of the above, financial markets will provide many profits the formation of the structure and due to the for the economy in currency exchange either liquidity of the interbank general and the currency would not be possible or currency market and its market in particular. would lead to increased position in the foreign volatility in the currency exchange market, the The most importent in market in the event of central bank would not the currency futures

IME 22 Quarterly Fall 2015 , Vol.2 which is also specified in The reason why the instrument for the central thr contract, is to have emphasis is made on bank to make policy in an exchange rate in the development of the the foreign exchange the future, so that the interbank market is that market. Although parties may determine this market is somehow most central banks do the rate as agreed controlling foreign the intervention and upon. Furthermore, in exchange derivatives policymaking in the the current situation, markets. Accordingly, currency market through only a limited number considering that the the interbank market, of the foreign currency possibility of central bank some of them also use applicants (buyers) have intervention in currency currency derivatives access to the currency futures exchange can in their policymaking provided by the central be embedded and built, efforts for the currency bank. Consequently, the central bank will be market. By formation this is actually the free able to control currency of the currency futures market that is reference futures rate fluctuations in exchange, the central for a majority of the its intended range. bank may manage the market participants in unusual volatilities in the the economy. In fact, Therefore, the formation currency futures rates, the supply of foreign of CFE will be possible or channel the foreign currency by the central even in the current exchange rate in the bank at the official rate economic situation of manner it has designed is the subsidy earmarked Iran. On the other hand, on the basis of its goals for some commodities the establishment of and purposes and the and economic activities, the currency futures economic situation. At so its extent of influence exchange provides present, to influence the is very limited. Therefore, room for traders, who activities of speculators in the event of formation currently operate in the in the informal market, of the CFE, the rate of informal spot and forward the central bank supplies spot market can become markets determining foreign currency through reference for the the free exchange its brokers in the market, decisions taken or laid by rate in a sphere of which results in the the market participants. ambiguity, to participate reduction of the country’s in a transparent, secure foreign exchange The interbank currency and manageable reserves. But, the currency market and its activity marketplace. In other futures exchange will are not substantially words, currency futures give the central bank an associated to the exchange provides opportunity to control currency futures the room for market the speculative activities exchange because the speculators who are without having to reduce interbank market, as working in the informal the foreign currency being clear from its title, market to participate reserves. With the help refers to the transactions in the organized and of God and with the done among and lawful markets, thereby launch of the currency between the banks and reducing the informal exchange, the economy the central bank while market power. of Iran will take a big step the futures exchange towards future. will be established In addition, the formation and operated in the of the currency futures capital market of Iran. market provides an

IME Fall 2015 , Vol.2 Quarterly 23 Central Banks Interventions in FX Markets

1. Brazil establishing the exact time buying contracts (which After the abandonment of of the auction typically may have the effect of the currency peg against a few minutes after the limiting the depreciation the US Dollar, in January announcement, the of the Brazilian Real), 1999, the Brazilian Central quantity of contracts that and as reverse swaps Bank started to operate the Central Bank is offering when the Central Bank under a floating exchange to buy or sell, as well as is selling these contracts. rate regime. Since mid- the maturities that are on Even though there is no 1999, the main objective offer. Each participating exchange of foreign of the monetary authority institution is allowed to currency involved and has been to meet the place up to five bids, the Central Bank does explicit inflation target specifying the quantity not alter the supply of that is set in advance by and price (i.e. the implicit the Conselho Monetario interest rate) for each. Nacional (CMN). The After bids are placed, Central Bank also acts in the Central Bank has the foreign exchange markets discretion to accept any in order to curb excessive volume of contracts up to exchange rate volatility. the maximum amount that is on offer. If the Central Since March 2002, the Bank is offering to buy foreign exchange, market Brazilian Central Bank these derivative contracts, participants typically see has used public currency the financial institution traditional swaps as being swap auctions as an receives the equivalent the financial equivalent instrument that is aimed of the exchange rate to a sale of USD Dollars in at ensuring the smooth variation over the time of the futures market by the functioning of the foreign the contract plus a local BCB. To the extent that exchange market, as well onshore US$ interest rate, a change in the supply as to ensure that there is a all paid in Brazilian Real. of SCC derivatives alters proper supply of hedging At the same time, the the supply of hedging instruments in the market. Central Bank receives instruments that are These swap contracts, to the cumulative interbank available in the market, some extent, replaced interest rate. such auctions will have domestic government an effect on the relative bonds that were linked to The BCB carried out 61 demand for USD dollars the exchange rate. currency swap auctions in the marketplace and, between January 1st, 2011 as a consequence, Swap contracts are and March 31st, 2013. the prevailing USDBRL registered at the During this period, the exchange rate. BM&FBovespa exchange timing and the volumes • Kohlscheen, E., & Andrade, S. as“SCC - Contrato de on offer did not follow any C. (2014). Official FX interventions through derivatives. Journal of Swap Cambial com Ajuste pre-announced rule. The International Money and Finance, Periodico”. Auctions local market convention 47, 202-216. are always announced has been to label auctions through the Central Bank’s as traditional swaps 2. Argentina communication system, when the Central Bank is The central bank’s foreign

IME 24 Quarterly Fall 2015 , Vol.2 exchange transactions levels. Foreign currency – Spot transactions take place during normal intervention policies have the potential to business hours via direct are mainly intended influence price movement trading in the wholesale to maintain exchange immediately. spot market. The results rate stability, particularly of these transactions at times when there – Spot transaction patterns are published via a daily are factors that impact can indicate speculative press release which states negatively on the Rupiah. market behavior. that an intervention Nevertheless, foreign has occurred and gives exchange intervention – Spot transaction volumes information about its size. is only undertaken when can reflect the volatility These daily press releases moral suasion is ineffective of the exchange rate. For

are summarized in the in influencing market example, spot transaction regular weekly Exchange participants and curbing volumes are almost in Report, which comes out excessive exchange rate line with Rupiah volatility, with a minimum lag and movements. so they can be used describes the dates and as consideration in the size of interventions. This Under the existing law, decision to intervene. policy of quickly providing Bank Indonesia has • Indonesia Bank (2005). Foreign full ex-post information the right to conduct exchange intervention and policy: Bank Indonesia experiences. BIS to the market contrasts all types of foreign Papers chapters, 24, 177-87 with the practices of most currency transactions for central banks, which tend intervention purposes. 4. South Korea to tactically use secrecy Yet Bank Indonesia Foreign exchange in their foreign exchange intervenes mainly through market intervention has interventions. spot transactions which been used as a main • Irigoyen, C. (2005, May). dominate the domestic instrument in achieving Foreign exchange intervention in foreign exchange foreign exchange market Argentina: motives, techniques and implications. In Participants in market. The choice of stabilization in Korea. As the meeting (p. 114). spot transactions for is also the case in other intervention relates to countries with floating 3. Indonesia factors such as: exchange rate systems, Just like other central the objective of foreign banks, Bank Indonesia – The volume of spot exchange intervention has the authority to carry transactions is relatively in Korea is to (i) mitigate out foreign currency large in the domestic short-term exchange rate intervention at both market. volatility, (ii) stabilize the policy and operational foreign exchange market,

IME Fall 2015 , Vol.2 Quarterly 25 (iii) pre-empt speculative movements. However, that have auctioned attacks, and iv) acquire intervention in the call and put options to foreign reserves, rather forward market has been mitigate exchange rate than to maintain a employed as rarely as volatility and adjust reserve certain exchange rate possible, except during holdings. Colombia’s target. In fact, it is true the currency crisis period central bank stated that with its thin foreign and in the second half clearly that when issuing exchange market Korea of last year, when there options contracts, its main faces the possibility of was severe speculative objectives were not only severe exchange rate trading in the off-shore to avoid excessive volatility volatility caused by various non-deliverable forwards in the exchange rate but external shocks, due to (NDF) market. In fact, also to do it in a way that changes in the global intervention in the NDF would uphold inflation economic environment market should be done targets, strengthen the and even geopolitical risks cautiously: intervention international liquidity surrounding the Korean operations could position domestically and Peninsula. In addition, the become all too frequent smooth any deviations Korean foreign exchange since the settlement for of the exchange rate authorities have also intervention is not needed from its long run trend. played the role of market immediately, and the The auctions of options maker through intervention effect of intervention on contracts in Colombia by supplying sufficient were fully transparent liquidity in the market and and the benefits of filling the gaps between these auctions were bids and offers in the derived from the hedging market. After the currency operations of market crisis in 1997, intervention participants. was, unusually, utilized to increase international the exchange rate at For the purposes of reserves in order to maturity would then be reserve accumulation and enhance Korea′s credit the opposite of what was decumulation, the central rating and avoid the initially intended. bank auctioned options possibility of additional • Rhee, G. J., & Lee, E. M. contracts on a monthly crisis. (2005, May). Foreign exchange basis. To accumulate intervention and foreign exchange market development in Korea. reserves, the central bank As for the intervention In Participants in the meeting (p. auctioned put options tools, verbal intervention 196). with a maturity of 30 days, by the authorities (MOFE 5. Colombia which give the buyer of and BOK) and real The Colombian central the contract the right to intervention in the spot bank began systematic sell US dollars at a given market are typically used. currency market price (strike price) to the Verbal intervention is interventions following central bank at maturity. used to facilitate foreign the introduction of a The central bank was exchange market stability floating exchange rate obligated to fulfill this beforehand or to give regime and the adoption contract, and therefore speculative forces a of inflation-targeting accumulated US dollars warning by conveying monetary policy in 1999. when the contract was the authorities’ concerns exercised. To decumulate and intention related Colombia is one of the reserves, call options with to exchange rate few countries to date a maturity of 30 days

IME 26 Quarterly Fall 2015 , Vol.2 were auctioned. The option premium and the pesos) to the owners of owner of the call option corresponding change in the contract at maturity had the right to buy US COPUSD relative to the 20- or at the exercise date. dollars at a given price day moving average. This action was aimed (strike price) from the to show the central central bank, and in turn, During periods when the bank’s commitment to by fulfilling its contractual COPUSD appreciated decreasing the relative obligations, the central by more than the given supply of Colombian bank decreased the percentage variation, pesos to US dollars in the amount of foreign volatility put options were market through the sale reserves that it held. The auctioned to mitigate the of US dollars (or purchase options were exercised appreciation pressure. By of Colombian pesos) when the exchange auctioning put options, at contract maturity rate appreciated or the central bank was or date of exercise. By depreciated with respect obligated to buy US dollars doing so, the volatility to the 20-day moving (or equivalently, to sell call options introduced average mean. pesos) from the owners of appreciationary the contract at maturity pressure to counter the Volatility options with or at the exercise date. depreciation over the 20- 30-day contract maturity Through the expectations day moving average. were auctioned whenever or signaling channel, this the exchange rate action was aimed to For the volatility options changed more than show the central bank’s contracts, the maximum a given percentage commitment to increasing amount exercised variation with respect the relative supply of was US$ 180million. In to the 20-day moving Colombian pesos to addition, the amount average. Until December US dollars through the to be auctioned in the 2001, the maximum purchase of US dollars (or subsequent month was percentage variation sale of Colombian pesos) determined at the end was set to 5%; 4% from at contract maturity or of each contract. From December 2001 to exercise date. By doing so, 1999 to 2009, there were a February 6, 2006; 2% from the volatility put options total of 38 volatility options February 6, 2006 to June created depreciationary contracts auctioned by 24, 2008; and 5% from pressure to counteract the the Colombian central June 24, 2008 to October appreciation over the 20- bank, consisting of 21 13, 2011. The volatility day moving average. volatility put options and option could be exercised 17 volatility call options. at any time within During periods when the The options intervention contract period when COPUSD depreciated strategy was abandoned COPUSD appreciated by more than the set when the central bank or depreciated more percentage change switched intervention than the established with respect to the 20- strategies to a daily percentage variation day moving average, discrete intervention plan, with respect to the 20- volatility call options were where the central bank day moving average. In auctioned to counter purchases an average of many cases, the option the depreciation. By US$ 20 million per day. was auctioned and auctioning call options, • Keefe, H. G., & Rengifo, E. W. immediately exercised the central bank was (2015). Options and central bank currency market intervention: on the same day or the obligated to sell US dollars The case of Colombia. Emerging following day as the (or equivalently, to buy Markets Review, 23, 1-25.

IME Fall 2015 , Vol.2 Quarterly 27 IME 28 Quarterly Fall 2015 , Vol.2 IME Fall 2015 , Vol.2 Quarterly 29 Petrochemical Market

The National Iranian Petrochemical Company (NIPC), a subsidiary to the Iranian Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is responsible for the development and operation of the country’s petrochemical sector. Founded in 1964, the NIPC began its activities by operating a small fertilizer plant in Shiraz. Today, the NIPC is the second largest producer and exporter of petrochemicals in the Middle East. Over these years, it has not only expanded the range and volume of its products, but it has also taken steps in areas such as R&D to achieve more self- sufficiency.

IME 30 Quarterly Fall 2015 , Vol.2 IME Fall 2015 , Vol.2 Quarterly 31 IME-NIPC Close Relations: A Symbol of Cooperation between the Trade and Production Sectors

ran Mercantile cooperation for shaping a contract, Parallel Salam, Exchange and the transparent and efficient ETCs, foreign currency INational Iranian market catering the funds, derivatives and Petrochemical Company needs of a wide spectrum certificates of depository (NIPC) convened several of beneficiaries from as well as warrants. meetings during the macroeconomics and Dr. SoltaniNejad in his last quarter in order to the upstream through to remarks maintained promote relations and downstream industries that Salam contracts design the roadmap and petrochemical have great advantages for revitalization of production units, to to finance the industry production and traders and end users. at lowest costs and in trading of strategic To this end, the IME shortest period. Mr. Sheri petrochemicals through CEO unveiled a number Moghaddam, the NPC the IME market solutions of plans, services and managing director in including securitization, trading solutions to his turn, welcomed the financial instruments, risk support and finance the IME plans as a great management and other capital-hungry production opportunity for the mechanisms. Various sector and traders petrochemical sector issues and plans were and investors through to ensure a robust value discussed and both financial instruments chain of market products. sides reiterated on close including Standard Salam

»»Iran has a diversified petroleum product basket with more than 70 products.The main exports are polyethylene, methanol, benzene, ammonia, sulphur, PVC and propylene. Iran exported $8.613 billion worth of different types of petrochemical products in Iranian year 2010-2011. »»Methanol: Iran is a key player in supplying the world’s methanol demand. Currently, Iran has the capacity to produce more than 5 million tonnes of methanol annually, which constitutes 10% of the world’s methanol production. Of this amount, approximately 90% is exported.

IME 32 Quarterly Fall 2015 , Vol.2 PVC Polyvinyl chloride, more correctly but unusually poly(vinyl chloride),commonly abbreviated PVC, is the third-most widely produced synthetic plastic polymer, after polyethylene and polypropylene.PVC comes in two basic forms: rigid (sometimes Trading PVC Standard Salam abbreviated as RPVC) Contracts in IME and flexible. The rigid form of PVC is used n order to finance and 27.5%, respectively, in construction for the petrochemical have been guaranteed pipe and in profile Iindustry of Iran, the for these securities. applications such as IME initiated trading of doors and windows. PVC Standard Salam Also, the return rate for It is also used for Contracts. Based on this closing the contract bottles, other non- financial instrument, the before maturity was 23% food packaging, and opportunity of a (one- on a daily basis. The cards (such as bank year and multi-year) PVC Salam Contracts or ID cards). It can be long term financing were issued at two made softer and more of petrochemical stages. At the first stage, flexible by the addition complexes was the initial offering was of plasticizers, the most provided and Abadan done through the “wide widely used being Petrochemical Company offering on a fixed price” phthalates. In this form, it gained 1.66 million USD method including the is also used in plumbing, of its working capital offering of 9,500 MT of electrical cable through issuing this PVC priced at 26,316 IRR/ insulation, imitation contract.It is worth noting Kg, at the second stage leather, signage, that these securities were the trading rolled out to inflatable products, Tax-Exempt and held in the Secondary Market of and many applications the customer’s name. the IME having lasted till where it replaces rubber. The minimum and the 31 of October. maximum profit of 24%

IME Fall 2015 , Vol.2 Quarterly 33 Metals and Minerals

Mining in Iran is underdeveloped,yet the country is one of the most important mineral producers in the world, ranked among 15 major mineral- rich countries,holding some 68 types of minerals, 37 billion tonnes of proven reserves and more than 57 billion tonnes of potential reserves worth $770 billion in 2014.Mineral production contributes only 0.6 per cent to the country’s GDP.Add other mining-related industries and this figure increases to just four per cent (2005). Many factors have contributed to this, namely lack of suitable infrastructure, legal barriers, exploration difficulties, and government control over all resources.

IME 34 Quarterly Fall 2015 , Vol.2 IME Fall 2015 , Vol.2 Quarterly 35 26 Million USD, Worth of Trade of the Iron Ore IME Financial Services to the Salam Steel Industry ollowing welcoming mineral industry by Fmarket participants, more than 26 million USD Iron Ore Standard Salam contracts from Chadormalu Mining & Industrial Company the (CMIC) were traded by customers at the first minute of trading. In order to finance the mineral industry of Iran and implementation of ran Mercantile instruments of the IME government policies to Exchange has including Salam and use the capacities of provided an array Forward. The listing, financial markets and the of financial market trading mechanism and commodity exchanges Iservices to different levels settlement of the new to finance businesses, of market participants instruments as well as trading of the underlying from industrial suppliers its delivery system were asset gained momentum to the final users of the enlightened during the in the IME and over 1000KT listed commodities presentations. Both of Salam iron ore were and underlying assets sides emphasized that traded worth of 26 million via both spot and the diversified services USD during the while. derivatives platforms. The like Salam, warrant historic visit of the IME and certificates of Using this Salam delegation, headed by commodity deposit Forward Contracts, the Dr. SoltaniNejad, to the can be considered as Chadormalu Mining Esfahan Steel Company financial instruments to & Industrial Co. found on November 17 marked improve production and opportunity to finance a new spotlight in the sales for steel suppliers though securities with IME relations with the in a method that the one year maturity and giant steel producer production line has garnered 26 million USD and supplier of the always a guaranteed fund through issuing Middle East. The IME source of capital and this contracts. It is worth meeting with the senior the inventories can be noting that these securities managers of ESC securitized and converted were Tax-Exempt and including Mr. Sadeghi, to this type of certificates. held in the customer’s managing director and the ESC called for the name. The minimum and Mr. Yazdizadeh the IME to share experience the maximum profit of 25% deputy MD in Planning in setting up the retail and 28%, respectively, and Development and market in Isfahan and have been guaranteed Chairman of the Board organize international for these securities. Also, of the IME, focused on marketing of steel the return rate was 22% on the ways to promote the products using its global a daily basis, during the steel industry through business relations. period. new financial and trading

IME 36 Quarterly Fall 2015 , Vol.2 B2X; an Approach to Curtail Production- Consumption Intervals

enerally, the store it in a warehouse reducing transaction volume of (controlled by the IME). costs are among the most Gtransactions for The warehouse will issue important advantages some commodities in Iran a certificate of deposit of establishing a B2X Mercantile Exchange is for the commodity and market. This plan will be so huge that a number register it in the system of accomplished for the first of minor actors do not B2X. In the next phase, stage on metal products dare to participate in minor natural or legal of Isfahan Steel Company this market. So, Isfahan persons, with various and after that will be Steel Company is one accesses to the system, administered on other of suppliers launching a can buy their required commodities offered in sales network to cover commodity in smaller the IME. This plan will be its products market amount. The commodity accomplished for the first and shorten the path will be delivered to the sage on metals products between production and last buyer and the selling of Isfahan Steel Company consumption. On the data will be registered and after that will be other hand, IME tends in the system. This online administered on other to complete financial comprehensive market commodities offered in services value chain is 24/7 service and the the IME. through B2X (B2G. B2B. customers can purchase B2C) in order to optimize their commodity in its service chain, curtail cash or credit. In this production-consumption process, the credit intervals, and improve its risk and delivering risk efficiency.Briefly, B2X is a are being covered. system of purchasing a Organizing commercial product in large quantities activities through the by a large trader and IME, risk management, »»B2X is the leading provider distributing to its agencies establishment of of customer care solutions to sell the product. information distribution for electronic devices to In the context of an system, flexible manufacturers, insurance exchange, B2X not only transactions, meeting the providers, mobile network operators and retailers will provide competitive needs of retail customers, globally.B2X has created opportunities for major online access to the the first shared services and minor actors in the market, providing the platform for unparalleled market, but also will result possibility of regulating customer care solutions. in flexible transactions the market in the retail Our Smart Service Platform and lower trading costs customers level, public consists of a global and risks. According to access to standard organization of highly this system, the large products and more experienced staff, a trusted traders purchase the competitive market, and reliable operational commodity of the spot geographic expansion fulfillment partner network market of the IME, as through less market and best practice service delivery processes. regular procedure, and intermediaries and

IME Fall 2015 , Vol.2 Quarterly 37 Agricultural

Roughly one-third of Iran’s total surface area is suited for farming, but because of poor soil and lack of adequate water distribution in many areas, most of it is not under cultivation. Only 12% of the total land area is under cultivation (arable land, orchards and vineyards) but less than one-third of the cultivated area is irrigated; the rest is devoted to dry farming. Some 92 percent of agro products depend on water.The western and northwestern portions of the country have the most fertile soils. Iran’s food security index stands at around 96 percent.

IME 38 Quarterly Fall 2015 , Vol.2 IME Fall 2015 , Vol.2 Quarterly 39 Article 33, Booster of Agriculture Trades in IME

he life-term negotiations between the age and support the agriculture sector to IME and the Ministry of Agriculture Ji- grow strategic products like wheat and Thad paid off and for the first time in the barley. Yet, the plan was not successful IME history over 100,000 tonnes of maize as the government just played the role of was deposited, offered and traded on the a purchasing machine regardless of the exchange platform via commodity certifi- quality of the commodity. Moreover, the cates of deposit as a financial commodi- government had no efficient tools to sell ty instrument. Each year by the beginning or distribute the purchased crop at market of the harvest season in late November in price or higher. So the government had to Khuzestan province, the largest maize pro- allocate huge annual budgets to fund the duction hub in the southwestern of Iran, plan and buy agricultural products at pro- the farmers rush to carry and deliver their duction hubs; therefore it sustained a very crop to the maize drying stations in order great loss during the past years by spend- to dry and store the cereal in the ware- ing large amounts of subsidies to protect houses to be sold later in future for high- the farmers who more often than not used er prices. However, since a majority of the to deliver low or medium grade crops to maize growers are retail farmers they are the provincial purchase centers, as no almost in dire need for cash so they may mandatory standards were levied by the have to sell the commodity at a lower plan or required by the centers.Accord- price for subsistence. On the other hand, ing to the article 33 of Agriculture Sector the government according to the law was Productivity Rising Act, passed by the Irani- responsible to buy directly from farmers an parliament 2012, the government was in the framework of the guaranteed-pur- mandated to follow its agriculture sector chase mechanism designed to encour- protection policies using the IME experi-

IME 40 Quarterly Fall 2015 , Vol.2 t the same time, the IME held re- sponsibility to offer, trade, settle Aand deliver the crop to the end users as promptly as possible. According to the guaranteed price plan the ministry of agriculture would set and offer the price of the crop on an annual basis. The farmers deliver the commodity to the exchange and receive the certificates of deposit and then offer the product to sell in the exchange. After trading of the commodity in the IME the value of the traded commodity is paid swiftly by the clearing house to the seller. According to the settlement formula, if the closing price of the standard quality product in IME is higher than the price of the government, the trade is all set and the transaction will be settled in full; but in the event that the traded price of the IME is lower than the government price, the balance and difference will be paid by the ministry of agriculture to the seller. Many of the emerging market economies have experienced successful implementation ence and potentials and infrastructures; of such projects with the same scenarios and to delegate the whole duty to the ex- in different episodes. The purchase of ag- change to organize auctions, trade and ricultural products through the guaran- clear the commodity transactions in the teed price mechanism, fostered by the spot market to attain the best results and IME, is a national-level mandate vested eliminate wasting resources and funds. At in the exchange. The plan provides un- last, the great expectations were met by deniably plenty of benefits to the gov- the IME taking the leadership in purchas- ernment, farmers, intermediaries, service ing the commodity by means of the guar- providers, consumers, and all players in anteed price mechanism fostered and the marketplace to spend funds and employed by exchange to cover the sup- budgets properly, to ensure the farmers ply chain from the field to the exchange of a fair system of price discovery and accredited warehouses issuing certifi- trading, eliminating the concerns of the cates of deposit for the farmers. The IME farmers about selling their products at was accordingly mandated to employ the harvest time, to encourage farmers best practices for the fair and transparent to employ best production practices price discovery of the agriculture products to grow Standard and healtliy product, specially barley, wheat and maize and to to preserve soil and water resources, to set up the mechanism for the purchase in bring high nutrition and healthy food in compliance with the standard quality of the consumers’ diet, to create jobs and the product as the main criterion to ac- new services and , last but not least, to cept the commodity at the designated add value to the supply chain of the ag- warehouses, and issue the deposit certifi- riculture commodities and the national cates to the farmers. economy as well.

IME Fall 2015 , Vol.2 Quarterly 41 IME 42 Quarterly Fall 2015 , Vol.2 IME Fall 2015 , Vol.2 Quarterly 43 Esfahan Mobarakeh Steel Company

MSC at a Glance and technical operations done during Mobarakeh Steel is the largest steel the construction phase of Mobarakeh producer in Middle East and Northern Steel are unique in the Middle East, for Africa and the largest DRI producer example near 18.7 million cubic meters in the world. Guided by a mission to of excavation and over 1.845 million play the leading role in Iran’s industrial, cubic meters of concrete, 1.8 million financial, and social growth, it is the square meters of formwork and 80,000 quality producer of more than 50% tonnes of reinforcement bars. About 150 of Iran’s steel in all major markets thousand tonnes of metal structures, including automotive, construction, one million square meters of roofing and household appliances, and packaging. more than 500 tonnes of equipment Mobarakeh Steel operates in seven and machinery were installed. industrial complexes and employs more than 20,000 people in different parts of The first electric arc furnace went the country. functional in October 1991 and factory production lines were inaugurated by History of MSC the then president on January 12, 1992. Mobarakeh Steel Company, now one With the introduction of company’s of the largest industrial units in Iran, was steel products to the market and the constructed in an area of 35 square gradual increase of production up kilometers near the city of Mobarakeh to the nominal capacity of 2.4 million and 75 km to the southwest of Isfahan. tonnes a major part of this strategic need of country was satisfied. Construction operations began in 1981 and into the years of war and under In the years after reaching the nominal aerial attacks of enemy fighters. Building capacity, to meet the increasing

IME 44 Quarterly Fall 2015 , Vol.2 demands of domestic and foreign • Development project of Saba Hot- markets, the company planned rolling Plant which was annexed to increases in its capacity in the form Mobarakeh steel in 2006 has increased of expansion projects, using the the plant’s capacity from 700thousand experience and financial credit from tonnes to 1.6 million tonnes. domestic and foreign sales, the first phase of development projects were • Also Hormozgan steel was merged carried out. The production capacity with Mobarakeh Steel on March 2011 of the company is planned to reach and its capacity is planned to be 11.5 million tonnes as the following increased from 1.5 million tonnes to 3 expansion projects are being executed: million tonnes.

• Steel-making under-roof development Esfahans’ Mobarakeh Steel Company plan in two phases of 5.4 and 7.2 million began trading its products in Tehran tonnes capacity increases. All the Metal Exchange on 2003 and has joined projects of the 5.4-million-tonne-phase Iran Mercantile Exchange on October are in their final stages and regarding 2007 and trades its products on the 7.2-million-tonne-phase the domestic metals and minerals trading necessary permits have been acquired floor of the IME. The following table and the needed infrastructures are in demonstrates offering, demand and place. trading of the company in the IME, on Fall 2015. Mobarakeh Steel Company in IME - Fall 2015 operation in Offered Vol. Demand Volume Traded Vol Value Share from Total (KT) (KT) (KT) (Milion USD) Domestic Trading 556 1,805 1,802 868 31% Floor IME Fall 2015 , Vol.2 Quarterly 45 Jey Oil Refining Company

Jey Oil Refining Company is a leading Air Blown Asphalt Capacity 40,000 BPD, company in the Iran’s oil downstream Cutback Bitumen Capacity 7100 BPD, and bitumen industry established in Bitumen Emulsion Capacity 20 T/hr, 2003. The refinery is located in Isfahan Storage Capacity 500,000 Barrels. The province and its main office is centered products are in line with international in Tehran. Jey company owns one of standards (Penetration the largest bitumen production sites and units in the Middle East producing Grade (ASTM), Viscosity Grade (VG)) a diverse range of quality bitumen and this company has the ability to types and grades in the industry. produce performance grade (PG) & Approximately 70% of the Jey Oil modified bitumen. Delivery services bitumen production is exported to the are in bulk, drum & Jumbo Bags. global destinations of Europe, Asia The company is proud of having and Africa. Jey refinery volume of certificates of CE, ISO/IEC 17025: 2005, production accounts for over 40% of ISO9001:2000, ISO/TS 29001:2003, and total bitumen production share in the because of their respect to standards of country. One of the major objectives Health, Safety and Environment, it has of this company is to meet domestic ISO 14001; 2004 & OHSAS 18001:1999 demands based on the latest standards Certificates, too. Jey Oil Refining as well as successful presence in the Company has joined Iran Mercantile global markets by providing high Exchange on September 2009 and quality products and imposing its brand since then has proved one of the most name across the market. Specialized trusted and reliable suppliers listed on knowledge, efficient staffs, customer the exchange offering products on satisfaction and compliance with domestic and export trading floors of environmental requirements are the IME. The following table recaps the core basis of this company. The a summary of the offering, demand refinery has four separate bitumen and trading statistics of Jey Oil Refinery production Units which are producing Company in the IME, during the fall blown bitumen by two processing 2015. units, bitumen emulsion and cutback bitumen.

Jey Oil Refining Company in IME - Fall 2015 operation in Offered Vol. Demand Volume Traded Vol Value Share from Total (KT) (KT) (KT) (Milion USD) Domestic Trading 5,545 1,265 1,250 324 19% Floor Export Trading 1,847 664 654 169 26% Floor IME 46 Quarterly Fall 2015 , Vol.2 IME Fall 2015 , Vol.2 Quarterly 47 IME 48 Quarterly Fall 2015 , Vol.2 IME Fall 2015 , Vol.2 Quarterly 49 Polymer Products

Volume of Offered, Demand & Traded Polymer Products Volume of Offering, Demand & Trading Polymer Products

2,000

1,500

1,000

500 VOLUME (THOUSAND T)

0 Offered Demand Traded

Fall 2014 Summer 2015 Fall 2015

Offered Demand Traded Fall 2014 1,120,881 1,059,509 531,107 Summer 2015 1,074,989 1,028,152 478,016 Fall 2015 913,974 1,812,408 521,219

ValueValue of Trading of Traded PolymerPolymer Products Products

688

522 700 505 600 500 400 300

VALUE (MILLIONSUSD) 200 100 0 Value (USD)

Currency Rate Ave. Value (USD) Fall 2014 32,931 688,191,469 Summer 2015 33,490 522,121,473 Fall 2015 35,417 504,761,490

IME 50 Quarterly Fall 2015 , Vol.2 Polymer Products Trading Value Polymer Products Traded Value (Fall(Fall 2015 2015)) 1% 13%

23% 60%

Polyethylene Polystyrene Polypropylene Polyvinyl Chloride Others

Product Vol. Value (IRR) Value (USD) Polyethylene 295,386 10,704,177,218,800 302,232,748 Polystyrene 12,270 614,065,520,000 17,338,157 Polypropylene 114,255 4,088,102,955,000 115,427,703 Polyvinyl Chloride 93,356 2,298,512,399,000 64,898,563 Others 5,951 172,279,597,870 4,864,319

IME Fall 2015 , Vol.2 Quarterly 51 Chemical Products

Volume of Offered, Demand & Traded Polymer Products Volume of Offering, Demand & Trading Chemical Products

600 500 400 300 200 100 VOLUME (THOUSAND T) 0 Fall 2014 Summer 2015 Fall 2015

Offered Demand Traded

Offered Demand Traded Fall 2014 497,873 355,261 246,770 Summer 2015 511,763 245,032 184,216 Fall 2015 465,390 413,549 207,086

ValueValue of Trading of Traded Chemical Polymer Products Products

156

160 140 92 87 120 100 80

VALUE (MILLIONS USD) 60 40 20 0 Value (USD)

Currency Rate Ave. Value (USD) Fall 2014 32,931 156,365,492 Summer 2015 33,490 92,404,261 Fall 2015 35,417 86,683,858

IME 52 Quarterly Fall 2015 , Vol.2 Chemical Products Trading Value Chemical(Fall Products 2015 Traded) Value (Fall 2015)

4% 16% 24% 4% 4% 11% 9% 6% 8% 8% 6%

Styrene Caustic Soda Toluene Diisocyanate Monoethylene Glycol Benzene Vinyl Acetate Linear Alkylbenzene Acids Sodium Bicarbonate Diethyl Others

Product Vol. Value (IRR) Value (USD) Styrene 22,296.00 691,738,248,000.00 19,531,249.06 Caustic Soda 81,070.00 330,194,080,000.00 9,323,039.22 Toluene Diisocyanate 4,000.00 252,000,000,000.00 7,115,227.15 Monoethylene Glycol 12,067.00 247,641,042,000.00 6,992,151.85 Benzene 13,798.00 242,295,010,000.00 6,841,206.48 Vinyl Acetate 6,298.00 177,649,000,000.00 5,015,924.56 Linear Alkylbenzene 4,560.00 170,426,340,000.00 4,811,992.55 Acids 11,745.00 128,997,034,000.00 3,642,234.92 Sodium Bicarbonate 7,500.00 108,851,490,000.00 3,073,424.91 Diethyl 5,390.00 103,594,524,000.00 2,924,994.32 Other 31321.8 469,278,635,600.00 13,250,095.59

IME Fall 2015 , Vol.2 Quarterly 53 Oil Products Volume of Offering, Demand & Trading Volume of Offered, Demand & Traded PolymerOil Products Products

7,000 6,000 5,000 4,000 3,000 2,000 1,000 VOLUME (THOUSAND T) 0 Fall 2014 Summer 2015 Fall 2015

Offered Demand Traded

Offered Demand Traded Fall 2014 4,022,700 3,572,725 1,970,738 Summer 2015 5,673,953 2,654,983 2,335,960 Fall 2015 6,770,617 2,698,368 2,211,027

ValueValue of of TradedTrading Polymer Oil Products Products

700 607

700 487 600 500 400 300

VALUE (MILLIONS USD) 200 100 0 Value (USD) Currency Rate Ave. Value (USD) Fall 2014 32,931 699,634,885 Summer 2015 33,490 606,778,992 Fall 2015 35,417 486,544,362

IME 54 Quarterly Fall 2015 , Vol.2 Oil Products Traded Value Oil Products(Fall Trading2015) Value (Fall 2015) 1% 2% 0% 4%

18%

75%

Slaps Wases Insulation Bitumen Sulphur Lube Cut Vacuum Bottom

Product Volume Value (IRR) Value (USD) Slaps Wases 7,500 50,608,000,000 1,428,918 Insulation 15,464 166,486,386,540 4,700,748 Bitumen 1,194,303 10,425,688,362 294,370 Sulphur 84,830 277,633,625,000 7,838,993 Lube Cut 168,750 1,226,413,400,000 34,627,817 Vacuum Bottom 740,180 5,085,111,910,000 143,578,279

IME Fall 2015 , Vol.2 Quarterly 55 Metals & Mineral Products

Volume of Offering, Demand & Trading Volume of Offered, Demand & Traded MetalsPolymer & Minerals Products Products

6,000 5,000 4,000 3,000 2,000 1,000 VOLUME (THOUSAND T) 0 Fall 2014 Summer 2015 Fall 2015

Offered Demand Traded

Offered Demand Traded Fall 2014 2,762,609 3,601,062 2,478,946 Summer 2015 3,703,491 5,336,775 3,086,238 Fall 2015 2,214,585 2,936,500 1,741,174

Value of TradingValue of TradedMetals Polymer & Minerals Products Products

1,382

1,078 1,400 1,200 690 1,000 800 600 400

VALUE USD) (MILLIONS 200 0 Value (USD)

Currency Rate Ave. Value (USD) Fall 2014 32,931 1,381,606,325 Summer 2015 33,490 1,078,004,208 Fall 2015 35,417 689,538,415

IME 56 Quarterly Fall 2015 , Vol.2 Metals & Minerals Products Traded Value Metals & Minerals(Fall Products 2015) Trading Value (Fall 2015)

2% 1% 9% 21%

67%

Aluminum Iron Ore Steel Copper Others

Product Volume Value (IRR) Value (USD) Aluminum 34,300 2,114,510,240,000 59,703,257 Iron Ore 440,000 205,527,245,000 5,803,068 Steel 1,183,875 16,382,293,138,000 462,554,512 Copper 79,790 5,131,196,175,000 144,879,470 Others 3,209 587,855,258,055 16,598,110

IME Fall 2015 , Vol.2 Quarterly 57 Agricultural Products

VolumeVolume of of Offering, Offered, Demand Demand & Traded & Trading AgriculturalPolymer Products Products

1,400 1,200 1,000 800 600 400 200 VOLUME (THOUSAND T) 0 Offered Demand Traded

Fall 2014 Summer 2015 Fall 2015

Offered Demand Traded Fall 2014 220,769 24,414 23,939 Summer 2015 1,262,648 284,125 227,805 Fall 2015 638,535 78,075 57,350

Value ofValue Trading of Traded Agricultural Polymer Products Products

104

120

100

80 31 60 8 40

VALUE (MILLIONS USD) 20

0 Value (USD)

Currency Rate Ave. Value (USD) Fall 2014 32,931 7,983,473 Summer 2015 33,490 103,599,032 Fall 2015 35,417 31,333,453

IME 58 Quarterly Fall 2015 , Vol.2 Agricultural Products Traded Value Agricultural Products(Fall Trading 2015) Value (Fall 2015) 2% 2% 19% 11%

66%

Rice Maize Crude Vegetable Oil Sugar Others

Volume Value (IRR) Value (USD) Rice 930 27,197,500,000 767,922 Maize 17,745 124,673,895,000 3,520,171 Crude Vegetable Oil 26,820 726,337,500,000 20,508,160 Sugar 9,370 207,163,235,000 5,849,260 Others 2,485 24,364,770,000 687,940 1,109,736,900,000 31,333,453

IME Fall 2015 , Vol.2 Quarterly 59 Export Pit

VolumeVolume of of Offering, Offered, Demand Demand & Traded & Trading Polymeron Expot Products Pit

VOLUME (THOUSAND T) 0 Fall 2014 Summer 2015 Fall 2015

Offered Demand Traded

Offered Demand Traded Fall 2014 2,099,840 2,098,749 1,055,749 Summer 2015 2,744,867 3,867,158 1,818,658 Fall 2015 2,817,681 2,432,439 1,241,814

ValueValue of Trading of Traded on Export Export pit Pit

306

350 207 201 300 250 200 150 100

VALUE USD) (MILLIONS 50 0 Value (USD)

Currency Rate Ave. Value (USD) Fall 2014 32,931 306,288,917 Summer 2015 33,490 207,190,365 Fall 2015 35,417 201,068,205

IME 60 Quarterly Fall 2015 , Vol.2 ExportExport Pit pitTrading Traded Value Value (Fall 2015) (Fall 2015)

1.34% 0.05%

0.09%

98.52%

Iron Ore Insulation Bitumen Sulphur

Product Volume Value (IRR) Value (USD) Iron Ore 440,000 205,527,245,000 5,803,068 Insulation 15,464 166,486,386,540 378,378 Bitumen 738,350 6,585,426,535,410 425,855,311 Sulfur 48,000 163,792,465,000 221,836

IME Fall 2015 , Vol.2 Quarterly 61 Total Total Volume of Offering, Demand & Trading Volume of inOffered, Spot Demand Market & Traded Polymer Products

14,000 12,000 10,000 8,000 6,000 4,000 2,000 VOLUME (THOUSAND T) 0 Fall 2014 Summer 2015 Fall 2015

Offered Demand Traded

Offered Demand Traded Fall 2014 8,624,832 8,612,971 5,251,501 Summer 2015 12,226,844 9,549,068 6,312,236 Fall 2015 11,003,101 7,938,900 4,737,856

TotalValue Value of ofTraded Trading Polymer in Spot Products Market

2,934 2,403

3,000 1,799 2,500

2,000

1,500 VALUE (MILLIONS USD) 1,000

500

0 Value (USD)

Currency Rate Ave. Value (USD) Fall 2014 32,931 2,933,781,645 Summer 2015 33,490 2,402,907,966 Fall 2015 35,417 1,798,861,578

IME 62 Quarterly Fall 2015 , Vol.2 Spot Market Trading Volume Spot Market(Fall Traded 2015 Volume) (Fall 2015) 1% 4% 11% 47%

37%

Polymer Products Chemcial Products Metals& Minerals Products Oil Products Agricultural Products

Spot Market Trading Value Spot Market Traded Value (Fall(Fall 2015)2015) 2% 28% 27%

38%

Polymer Products Chemcial Products Metals& Minerals Products Oil Products Agricultural Products

Row Labels Offered Demand Traded Value (IRR) Currency Rate Ave. Value (USD) Polymer Products 913,974 1,812,408 521,219 17,877,137,690,670 35,417 504,761,490 Chemcial 465,390 413,549 207,086 3,070,082,183,600 35,417 86,683,858 Products Metals& Minerals 2,214,585 2,936,500 1,741,174 24,421,382,056,055 35,417 689,538,415 Products Oil Products 6,770,617 2,698,368 2,211,027 17,231,941,683,950 35,417 486,544,362 Agricultural 638,535 78,075 57,350 1,109,736,900,000 35,417 31,333,453 Products

IME Fall 2015 , Vol.2 Quarterly 63 Futures Contracts

NumberNumber of of FuturesFutures Contracts Contracts

341,276 245,700 350,000 245,700 300,000 250,000 200,000 150,000 100,000 50,000 NUMBER OF CONTRACTS OF NUMBER 0 1

Fall 2014 Summer 2015 Fall 2015

ValueValue of of Futures Futures Contracts Contracts

931

1,000 698 651 800 600 400 200

VALUE (MILLIONS USD) 0 Value (USD)

Fall 2014 Summer 2015 Fall 2015

Offered Demand Traded Fall 2014 8,624,832 8,612,971 5,251,501 Summer 2015 12,226,844 9,549,068 6,312,236 Fall 2015 11,003,101 7,938,900 4,737,856

IME 64 Quarterly Fall 2015 , Vol.2 www.ime.co.ir