Types of Commodities Traded in India – Bullions, Base Metals, Agri Products & more

In this article, you will find details about various types of commodities traded in India. Some of the most traded commodity category are Bullions, Base Metals, Energy & Agri Products.

Lets have a detailed understanding of the same.

Types of Commodities Traded in India

In the past few years, commodity trading has gained significant importance, especially among the working class.

This is because of the flexible timings offered by the commodity market. The people who are generally busy with their nine to five job do not have time to trade equity.

For such people, commodity trading is the ideal market. But just like any other market, there are a lot of commodities that are available for trading in the commodity market.

It is not possible for an individual to go through all the types of commodities traded and do research on each of them.

We have made a list of the four major types of commodities traded in India to help you out.

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Bullions – Most Traded Commodity in India

The term bullion refers to the precious metals which are traded in the commodity market. In India, the two main metals falling under bullion are gold and silver.

However, precious metals like gold, silver, platinum, and palladium are not just commodities, but they possess the ISO 4127 country code as well, which makes them de facto money.

Let us now take a brief look into the two bullions:

Gold:

It is a known fact that before paper currency came into existence, gold was a widely used currency for all trades.

The history of gold, which goes back to centuries, makes it one of the most important instruments of the financial world.

If we talk about the usage of gold, it is widely used for making jewelry, etc. but this is not the only purpose gold fulfills.

The industrial and commercial usage of gold includes electronics, glass making, medical treatments, etc.

In terms of the production statistics, India is the largest consumer of gold, with an annual consumption of nearly 700 tones. At the same time, countries like China, Australia, Canada, and Indonesia are the biggest producers.

Gold is considered a safe investment, and some people even believe that it should be a compulsory inclusion in your portfolio. This is because gold provides security to your portfolio in events of economic meltdown.

Most of the gold trading in India takes place in the MCX market in four forms that are Gold, Gold Mini, Gold Guinea, and Gold Petal.

Silver:

The origination of silver is quite different from other metals. Silver is obtained from lead ore and as a by-product of base metals. These metals are copper, gold, and zinc. Just like gold, silver also has diverse usage in various fields.

Apart from using silver for jewelry and other decorative items, the users of silver use it for industrial purposes, scientific purposes, and as an investment.

From a trader’s perspective, it is always important to know about the factors that affect the price of a commodity.

In silver, the price is determined by industrial demand, government policies, inflation, and price change in other securities like gold. In India, silver is mostly traded on the Multicommodity exchange, i.e., MCX.

According to the terms of volume, silver is one of the most traded commodities with tones of silver traded daily.

The three main forms in which silver is traded are Silver, Silver mini, and silver micro.

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Base Metals – Commodities Traded in India

The existence of base metals goes back to 6000 BC. From a scientific point of view, the metals that corrode and oxidize easily are termed as base metals. Apart from this, they also tend to form hydrogen on reacting with dilute hydrochloric acid.

The base metals are generally inexpensive, but that does not disqualify the usage they have. Metals like aluminum, silver, copper, etc. are used in almost every industry as in the form of machinery or appliances.

Though there are numerous base metals found in the environment, not all of them are traded in the market. The base metals traded in the commodity market are Aluminum, Copper, Lead, Nickel, and Zinc.

Aluminum:

The lightweight and versatile characteristic of aluminum makes it one of the most widely used base metals in all industries.

Therefore, the consumption of aluminum by a country might depict the infrastructural development in the country.

Infrastructure forms a major part of any country’s GDP. Therefore, aluminum finds an indirect link to the country’s GDP level as well.

Due to its wide usage, the price of aluminum is directly affected by market demand and supply. Surprisingly China is both the biggest consumer as well as producer of aluminum.

Copper:

It might not be an overstatement to say that copper is probably the most widely used metal in both the commercial and household sector.

Copper is a great conductor of both heat and electricity, which makes it a perfect fit for industries such as electrical wiring, plumbing, roofing, etc.

The price of copper gets affected by the demand by world economies. Countries like China, which are leaders in terms of infrastructure, affect the prices of copper through their demand.

Lead:

In terms of usage, lead is primarily used for industrial purposes such as manufacturing of automobile batteries, etc.

One of the most crucial features of lead that makes it different from other base metals is its tendency to resist corrosion.

This feature makes it one of the most sustainable and recyclable metals as it do not lose its properties when recycled.

In India, the prices of lead are determined by the rates in the international market and the currency exchange of Indian rupee and dollar.

Nickel:

Nickel is one of the most commonly found metals and currently ranks at the fifth position in the list of metals.

The metal occurs extensively in the earth’s crust, but most of it cannot be accessed due to obvious reasons.

Some of the most common characteristics of Nickel include its lustrous nature, high melting point, and above all, it is resistant to corrosion and oxidation.

Due to this ability to resist corrosion, Nickel is widely used to produce stainless steel and alloys.

Zinc:

In terms of worldwide usage, zinc stands 4^th in the list of metals.At the same time, the first three metals in the list are Steel, Aluminum, and Copper, respectively. Zinc is one of those metals which can be found in abundance.

In fact, as per the official data given by MCX India, there are 1.9 billion tons of identified resources of zinc.

Talking about the usage, zinc is used mainly as an anti-corrosion agent by applying a coat of zinc on metals such as galvanized steel.

The price of zinc is directly affected by the price in the international spot market and the currency exchange of Indian rupee and dollar.

Understand in Detail about Commodity Market here

Energy – Highly Traded Commodities in India

For every economy, the consumption of energy is one of the most important driving forces.

In the Indian commodity market, crude oil along with its by-products and natural gas constitute more than half of the energy consumption.

In fact, these are the two major commodities traded in the Multi Commodity Exchange India. Let us take a brief look at each one of them.

Crude Oil:

For years, crude oil has been the most important source of energy due to its high abundance, high energy density, and easy transportability.

All the major fuels such as petrol, diesel, kerosene, etc. are all extracted from crude oil, which makes it a significant resource.

Therefore, it is often referred to as Black gold in the international markets. OPEC, which is also known as the Organization of petroleum exporting countries, holds power to drive the prices of crude oil.

In fact, as per the reports of 2019, OPEC had control over 40% of the world’s crude oil.

Natural Gas:

As the name suggests, it is one of the cleanest, safest, and most useful sources of energy when compared to sources like crude oil.

In a century where people are concerned about the future and are looking for a sustainable source of energy, natural gas is gaining a lot of significance.

If we look at it from a trader’s point of view, price is one of the most important factors.

The price of natural gas is affected by factors such as inventory data, weather conditions, price of crude oil, and the demand by industries as well as households.

Agriculture – Among Most Traded Commodities in India

Agriculture is one of the most important sectors in terms of contribution towards GDP and probably the most important in terms of employment in India. If we talk about the macro level, India ranks second in terms of farm production.

It is because of this massive rate of production that India exports more than $50 billion worth of agricultural goods, making it one of the largest exporters.

If we look at the commodity market, there are mainly six agricultural commodities traded in the MCX market. Let us take a brief look at them.

Black pepper:

For ages, black pepper has been one of the most important spices globally. In fact, some people often call it the king of spices. If we talk about the production and consumption in India, Kerala and Karnataka play a crucial role.

This is because these states are responsible for most of the pepper production in India. However, the demand for pepper is not completely met through production.

This leads to the import of pepper from countries like Vietnam, Sri Lanka, and Indonesia.

Crude Palm Oil:

Crude palm oil is obtained from the tree. It is derived from the fresh fruit branches of the tree. Over the period, the consumption of crude palm oil has increased in India.

This is because earlier, the people who preferred using groundnut oil have now switched to palm and soya bean oil.

In terms of global production, Indonesia and Malaysia are the two leading producers and exporters. Therefore the price of crude palm oil depends majorly on these two countries.

Cotton:

It is no news that cotton has been one of the most widely recognized and used fabric globally for ages.

The production of usable cotton starts from fiber, which is later used for making textiles. Due to its high demand, cotton accounts for nearly 35% of the total fabric demand in the world.

However, cotton does not only serve the purpose of a fabric. The seed of cotton can be crushed to make cottonseed cake, which serves as food for livestock.

While the oil obtained is used for consumption worldwide. In fact, the cottonseed oil is the 5^th most consumed oil in the world

Cardamom:

Cardamom is one of the most exotic and expensive spices compared to spices like black pepper etc. Due to this, it is also known as the queen of spices.

In India, cardamom takes nearly two years to grow, and it is divided into three types, i.e., Malabar, Mysore, and Ceylon.

As per the records, the annual production of cardamom is nearly 30000-35000 MT, out of which nearly 10000-12000MT is produced by India.

Therefore, this makes India the second-largest producer of cardamom. However, more than 90% of the produce is consumed in the country itself.

Mentha Oil:

As the name suggests, Mentha Oil is derived from the aromatic herb Mentha. The process of drying, steam distillation, and filtration leads to the production of Mentha Oil. Oil is widely used by various industries such as food, pharmaceutical, perfumery, etc.

In terms of production, India has been the largest producer and exporter of Mentha oil for a very long time.

The price of Mentha Oil is affected by production as well as national and domestic demand.

Rubber:

Rubber or Natural Rubber (NR) is produced from trees through the latex obtained from them. The commodity Rubber is processed in various forms, including sheets, block rubber, crepes, etc.

If we talk about the global market, 7-8 million tons of rubber is produced every year, out of which the transportation sector uses 60%.

Indian production is relatively lower with an annual production of 6-7 lakh tons, out of which 90% is produced by Kerala and the remaining by Karnataka.

The price of rubber is driven by the weather and demand for automobile industries. For instance, the prices of rubber generally fall in the rainy season due to a lack of production.

Conclusion – Types of Commodities Traded in India

Here we have thoroughly discussed some of the most traded commodities in India. Now, you know, where to invest your money when it comes to commodity trading.

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