Jakarta, August 19th, 2021 - The abundance and diversity of Indonesian commodities are vital assets for the country's economy and income for the government. Citing data from Bappenas, the value of Indonesia's exports in June 2021 reached USD18.6 billion.
However, as a major producer and exporter of the world's major commodities, Indonesia is still vulnerable to the effects of price volatility on global commodity markets. Therefore, we need a platform that regulates the commodity trading market to be able to transact effectively when commodity prices go down or up.
“The commodity exchange has the potential to become a commodity trading center to facilitate the needs of buyers and sellers of a commodity, to form a perfectly competitive market that can create efficient and transparent trade. A country's commodity exchange can act as a trading center for the country's main commodities," said ICDX Vice President of Research & Development, Isa Djohari.
The establishment of Commodity Futures Trading (PBK) in Indonesia through the exchange is expected to become a center for local commodity trading and provide hedging facilities for commodity traders. Thus, trading of Indonesia's leading commodities through the exchange can produce reference prices so there is no need to rely on markets abroad.
Through domestic commodity exchanges, market participants can also obtain more favorable prices. Manufacturers can sell at higher prices, while manufacturers can buy at lower prices based on transparent market mechanisms.
“As a commodity exchange, one of the main goals of ICDX is to create a fair, accessible, and well-regulated commodity market in Indonesia through the exchange mechanism. To achieve this, ICDX builds an integrated ecosystem with a clearinghouse and logistics system. This integrated commodity market infrastructure must be able to support each other to form the three pillars of commodity futures trading that has the potential to increase the competitiveness of commodity market players in Indonesia," added Isa.
This can be seen from one of the world's leading commodities, tin. Before ICDX received a mandate from the government to operate as a trading platform for tin exports, it was difficult for Indonesian tin producers to determine their selling price because the reference price refers to prices set abroad (London Metal Exchange & Kuala Lumpur Tin Market).
Through ICDX, Indonesia has succeeded in changing this condition and increasing the number of destination countries for tin exports to 27 countries. Now, Indonesian tin producers can determine their tin selling prices and the state revenue from tin exports will be more optimal.
"We do not stop there, currently ICDX is developing the three pillars of futures trading presented by BAPPEBTI, namely the Warehouse Receipt System (SRG), Commodity Auction Market (PLK), and PBK itself. The development of the three pillars of futures trading by the ICDX Group is expected to pave the way for ICDX to develop trading of various other commodities in Indonesia," said Isa.
If sorted from the production process, then the journey of trading a commodity can be started with SRG. Agricultural commodities produced by producers during the harvest season may enter the market with excess supply conditions. Producers can delay sales by storing their commodities in warehouses with SRG. The transparent price formed in the PLK then becomes a reference for the level of financing in the SRG. With this integration, the commodity futures exchange can focus on providing services for hedging.