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Aviation
Turbine Fuel
Multi Commodity Exchange of India Ltd (MCX) is a demutualised exchange with permanent recognition
from the government of India. MCX offers futures trading in ! commodities including "ullion# energy# grains#
plastics# metals# oil and oilseeds# fi"res# spices# pulses# sugar# plantations and car"on credits as on March $%#
&''(. )he average daily turnover on the MCX platform was *s. %'&#(&+.!' million during fiscal &''+,'(.
-). is clear to
straw coloured
and is a "lend
of
hydrocar"ons# a
product of
petroleum
refining which
"elongs to the
middle distillate
group.
GENERAL
CHARACTERISTICS
-viation tur"ine fuel (-).) or /et fuel is a speciali0ed type of petroleum,"ased fuel used to power
aircrafts. It is generally of a higher 1uality than fuels used in less critical applications such as heating or
road transport. -). is clear to straw coloured and is a "lend of hydrocar"ons# a product of petroleum
refining which "elongs to the middle distillate group. In some regions# lower 1uality specification
2erosene or a dual,purpose grade is produced and used as a domestic heating fuel# especially in
-sia and nota"ly in 3apan and 4orea. In India# the 2erosene mar2et is divided in three segments
namely# 5u"lic 6istri"ution 7ystem (567)# Industrial 4erosene and -viation )ur"ine .uel. -lmost all the
Indian 2erosene is consumed through the 567.
-irline companies# "eing the single largest user of /et fuel# are exposed to price ris2 owing to
extreme volatility in prices worldwide. )ypically# airlines have to either a"sor" the price volatility or
pass the same to consumers. 8owever# glo"alisation and the competitive scenario existent today
demands competitive pricing in the a"sence of which airlines stand to lose "usiness. )o decrease
cost per passenger and increase revenues# airlines need to hedge their price ris2 inherent in /et
fuel "y ta2ing positions in the futures mar2et. Crude oil refineries# on the other hand# are faced with
the ris2 of decreasing product prices which includes -).. 6ecreasing product prices put a strain on
refining margins leading to lower profita"ility. -gain# -). futures are re1uired to mitigate the price ris2
faced "y these refineries.
-s the primary function of aviation tur"ine fuel (/et fuel) is to power an aircraft# energy content
and com"ustion 1uality are 2ey fuel performance properties. 9ther significant performance
properties are sta"ility# lu"ricity# fluidity# volatility# non,corrosivity# and cleanliness. :esides providing a
source of energy to power the aircraft# fuel is also used as a hydraulic fluid in engine control systems
and a coolant for certain fuel system components. )here is only one type of /et fuel# 2erosene type#
in civil use world wide. 7o it;s extremely important to fuel supplier to ensure fuel in high 1uality
and internationally recogni0ed standard accordingly.
Lighter (less dense) fuels# such as gasoline# have higher heating values on a weight "asis< whereas
heavier (more dense) fuels# li2e diesel# have higher heating values on a volume "asis. 7ince space is
at a premium in most aircraft# the amount of energy contained in a give 1uantity of fuel is
important. - fuel with high volumetric energy content maximises the energy that can "e stored in a
fixed volume and thus provides the longest flight range.
T YPES OF JET
FUEL
3et fuel is availa"le in the following
types<
= 3et -,% =35,% =35,> =35,
= 35,! =35,+ =35,( =35)7
3et -,% is the most commonly used /et fuel type. It has the following
characteristics<
= .lash point< $(?C =-utoignition temperature< &%'?C
= .ree0ing point< ,>+?C =9pen air "urning temperature<
&(+.?C
= Maximum "urning temperature< @('?C =6ensity at %?C< '.('+ 2gAL
.or private circulation only.
Crude Oil
Distillation Tower
Crude 9il
8eating :urner
5etroleum gas
B >'
C C
%
to
C
$
Casoline >',
&'' C C
>
to C
%&
4erosene# /et fuel
&'',&'
C C
%&
to
C
%!
8eating oil &',
$'' C C
%
to C
%(
Lu"ricating 9il
$'',$+'
C C
%@
and up
*esidue# asphalt
C
&
and up
C. 9phardt c. %@@(
The picture of the distillation tower shows jet fuel being distilled
out of crude oil at around 200 250 degree Celsius.
-s inferred "y the chart "elow# -). sales accounted for around $.D of total sales of petroleum
products while 7uperior 4erosene 9il (749) accounted for +.@D.
eg!entation of "roduct ales
-irline
companies#
"eing the single
largest user of
/et fuel# are
exposed to price
ris2 owing
to extreme
volatility in
prices
worldwide.
Paraffin Wax, 0.16
Coke, 4.07
Bitumen, 3.20
Lubes / Greases, 1.4
L!"!, 2.1
#$, 7.7%
L&$, 0.60
$t'er (i)s, 0.41
"!&$, 3%.%
$t'er Waxes, 0.0%
$t'er "ea*+, 1.4,
LPG, ,.0
(o-as, 7.77
.a/'t'a, 10.66
$t'er Li-'ts, 3.34
!0$, 7.,%
12#, 3.32
7ource< Ministry of 5etroleum and Eatural Cas# India
ww w .mcxindia.com
U
S
$

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Industries that are directly affected "y volatility in 2erosene or aviation tur"ine fuel prices are<
= 9il refining = -viation
= 5ower generation = 7hipping
= 7teel = *ailways
= Metallurgy = Chemical# etc.
)he aviation industry is the single largest user of -).. .or any airline company# -). forms the ma/or
portion of their material cost. -lmost >'D of the total input cost to an airline company is composed of
/et fuel.
*epairs F
maintenance
&D
Insuranc
e
premium
%D
9ther repairs
&D
9ther
expenses
%D
9perating
expenses
&D
7alaries F
wages
%D
Energy
(power F fuel)
>'D
7ource< 5etroleum 5lanning and -nalysis
Cell
DEMAND-SUPPLY
SCENARIO
Indigenous production of -). in India in &''+ was +#('#''' tonnes. India is self,sufficient in production
of these products with exports of $#!!&#''' tonnes. )he Indian oil companies produce enough
2erosene and -). to meet the domestic demand. -lso the pricing of 2erosene is revised "y these
companies dynamically in tandem with international rates. 8ence the volatility of international crude oil
prices is spilled over to the -). and industrial 2erosene prices.
)here is only
one type of /et
fuel# 2erosene
type# in civil use
world wide.
%&
'
%%
'
%'
'
@
'
(
'
+
'
!
'

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1
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3
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AT F "rices
12# Pri3es
7ource< :loom"erg
ww w .mcxindia.com
#
0
0
0

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o
n
n
e
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$

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5rices of -). internationally have increased from G7H >! in 3anuary &'' to G7H %'@ in 3anuary
&''(# which is an increase of almost %$+D owing to s2yroc2eting crude oil prices. 6emand for -).
has increased exponentially due to introduction of many "udget airlines and increased air traffic.
Compared to &''','%# consumption of -). has increased "y almost ++D in &''!,'+. )he following
chart explains the increasing demand for -). in India.
ATF$ De!and % uppl&
@'''
('''
+'''
!'''
'''
>'''
$'''
&'''
%'''
'
&''','% &''&,'$ &''$,'> &''>,' &'','! &''!,'+I
-). 6emand -). 7upply
7ource< Ministry of 5etroleum and Eatural Cas# India
-). sales
accounted for
around $.D of
total sales of
petroleum
products while
7uperior
4erosene 9il
(749)
accounted for
+.@D.
Exports of -). have touched $#!!& tonnes in &''!,'+# which is a %&'D increase compared to
exports during &''$,'>. 7ince -). is a distillate of crude oil# there exists a high degree of correlation
"etween their prices (@!D).
Crude - ATF Correlation
12# Cru)e $i4
7ource< :loom"erg
%$' %&'
%%' %''
@' ('
+' !'
' >'
$' &'
%' '
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7ym"ol -).
6escription -).MMMJJ
CO'T(ACT A)A*+A,+- FO( T(AD* .
3anuary contract &!th 3uly of the previous year to &th 3anuary of
the contract year
.e"ruary contract &!th -ugust of the previous year to &th .e"ruary of
the contract year
March contract &!th 7eptem"er of the previous year to &th March of
the contract year
-pril contract &!th 9cto"er previous to &th -pril of the contract year
May contract &!th Eovem"er previous to &th May of the contract Jear
3une contract &!th 6ecem"er previous to &th 3une of the contract year
3uly contract &!th 3anuary to &th 3uly of the contract year
-ugust contract &!th .e"ruary to &th -ugust of the contract year
7eptem"er contract &!th March to &th 7eptem"er of the contract year
9cto"er contract &!th -pril to &th 9cto"er of the contract year
Eovem"er contract &!th May to &th Eovem"er of the contract year
6ecem"er contract &!th 3une to &th 6ecem"er of the contract year
T(AD*'.
)rading period Mondays through 7aturdays
)rading session Monday through .riday < %'.'' am to %%. pm
7aturday < %'.'' am to &.'' pm
)rading unit %'' "arrels
KuotationA:ase value *s per "arrel
Maximum order si0e %'#''' "arrels
)ic2 si0e (minimum price movement) *e. %
FACTORS AFFECTING PRICES
= Crude oil prices
= -viation industry demand L domestic and international (air traffic# etc.)
= 5olitical ris2
= .orex fluctuations
= Clo"al events# such as 9lympics# etc# that push demand for air travel
EXCHANGES TRADING IN KEROSENE
= )o2yo Commodity Exchange ()9C9M)
= C,C9M
USEFUL LINKS
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CONTRACT SPECIFICATIONS OF ATF
Indigenous
production of
-). in India in
&''+ was
+#('#'''
tonnes. India is
self,sufficient in
production of
these products
with exports of
$#!!&#'''
tonnes.
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'ote$ 5lease
refer
procedures
.
5rice 1uote Ex,Mum"ai excluding all taxes# levies and freight
6aily price limits > D
Initial margin D
7pecial margin In case of additional volatility# a special margin as deemed
fit# will "e imposed immediately on "oth "uy and sell side
in respect of all outstanding positions# which will
remain in force for next & days# after which the special
margin will "e relaxed.
Maximum allowa"le open position .or individual clients< !#''#''' "arrels
.or a mem"er collectively for all clients< $'#''#''' or
%D
of the open mar2et position# whichever is higher
D-+*)-(/
6elivery unit $''' ""l with MA, &D tolerance limit
6elivery margin &D
6elivery centre 5ort installation at Mum"ai A 3E5) port
Kuality specifications -). c o n f i r m i n g to fo l l ow i n g I 7 %+% < & '
'% 1u a l i t y specifications<
Characteristics (e0uire!ents
6ensity (% degrees C# gmAcm$) '.++ to '.(>'
.lash point (degrees C) Min. $(
7mo2e point (mm) Min. &$
7ulphur (D wt) Max. '.$
6elivery logic :oth option
6ue date rate 6ue date rate is calculated on the last trading day of
the contract on the "asis of closing price of relevant
contract of )9C9M converted into Indian *upee
"ased on rupee conversion reference rate from
3apanese yen as declared "y *:I on the same day.
%
%
A
&
'
'
(
Exports of
-).
have touched
$#!!& tonnes in
&''!,'+# which
is a %&'D
increase
compared to
exports during
&''$,'>.
to the exchange circulars for the latest contract specifications and delivery and
settlement
For Custo!er upport $ 123%22%
44525050
To get the latest futures price of a co!!odit&6 s!s 7C8 9Co!!odit& 'a!e:
to 55555
Exchange 71uare# C)7 Eo. &# 7uren *oad# -ndheri East# Mum"ai
>'''@$# India.
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