Value of DMCC transactions nearing billion-dirham mark

From left to right: Ian McDonald, Executive Director for Gold at DMCC; Dr David Rutledge, CEO of DMCC; Ahmed bin Sulayem, Executive Chairman at DMCC; James Binns, Head of Mid0Market Corporate Banking-UAE for HSBC and Ashok Das, Executive Director – Soft Commodities at DMCC

The total value of transactions done at the Dubai Multi Commodities Centre (DMCC) since it was set up in 2006 is fast approaching the billion-dirham mark after it exceeded Dh950 million recently, according to a top executive of the body.

Ashok Das, Executive Director of soft commodities and commodity trade finance at DMCC, added 110 commodities traders have registered with the centre so far and carried out a total of 1,149 transactions.

Das was speaking at the inauguration of new online facilities of the DMCC Global Multi Commodities Receipt (GMR), which has been expanded to cover international jurisdictions for the first time. The GMR has started covering trading receipts in Singapore, Malaysia and South Korea, along with the UAE.

It is an advanced system for the handling of different commodities, as it lowers the risk for banks in funding transactions and helps them to obtain better return on capital through eliminating the risk of multiple borrowings against the same goods, Das said.

He added the online GMR system is useful in preventing commodity frauds and offering easy access to funds while protecting traders from making distress sales.

David Rutledge, CEO of the DMCC, said: "The GMR is designed to facilitate trade and commodity financing across international markets. It allows businesses to access lines of credit against their inventories by pledging them in favour of member banks. The DMCC has plans for expansions in other international jurisdictions, mainly in Europe and the US.

"The GMR was being used since the start of trading in DMCC and now we are going global. The system was being used for physical delivery of commodities in the Dubai Gold and Commodities Exchange (DGCX). A total of Dh724m worth of Dubai Gold Receipts have been issued, 95 per cent of which were delivered through trade finance and only five per cent through the DGCX. Total trade finance transactions in gold this year have reached Dh304m."

Das said soaring commodity prices combined with the growing need for traders to increase their credit lines have led to increased opportunities for trade finance by banks. "The GMR platform facilitates this by lowering the risk in financing and also improves profit margins for traders," he said.


Gold prices to rise

The price of gold will continue to rise in the immediate future on the back of increased demand for commodities as well as for hedging, said the head of gold transactions at the DMCC. Ian MacDonald, the DMCC's Executive Director for gold, said: "Governments around the world are increasingly interested in gold reserves as well as dollar reserves.

Gold prices tripled in the last three years and this has increased the desire of several countries to create stronger gold positions as reserves. "Also, commercial institutions are using gold as a hedge against changes in currency value."

He told Emirates Business gold prices can be a good indicator of inflationary pressures. "As long as inflation increases, gold prices will keep surging. Also, there is a greater demand for commodities worldwide.

"The main issue about increasing prices of commodities is that all people are looking at the demand, while the real shortage is in the supply of these commodities. Investments are being generated on the demand side, not to create more resources for the supply of these commodities," MacDonald said.