May 12, 2015 10:50 am Published by

Soyabean in bear grip

Notwithstanding strong global cues, soyabean in Indore mandis traded lower at ₹3,900-4,000 a quintal on increased arrival, slack buying support and decline in futures. Slack demand in soya oil and increased arrival of soyabean also dragged its plant deliveries to ₹4,050-4,100. Arrival of soyabean in mandis across Madhya Pradesh was recorded at 60,000-70,000 bags. Soya oil traded higher on strong global cues even as demand in the physical market remained weak. On Monday, soya refined rose to ₹615-20 for 10 kg, while soya solvent ruled at ₹590-95. Soyameal on the spot was at ₹38,500-39,000 a quintal (₹36,500 last week) on improved buying. However, export demand in soyameal continued to remain poor.

Nickel prices may rise next year but China holds key

The world nickel market has gone through tremendous upheaval in recent years with strong government intervention and consequent price action leading to price volatility and supply woes. Speculative positioning has exacerbated the situation.

Following the ban on ore exports imposed by Indonesia in January 2014, speculative funds propelled nickel prices closer to $20,000 a tonne, up nearly 50 per cent from the pre-ban levels. However, a combination of factors resulted in prices sliding to pre-ban levels. These included large inventory of Indonesian nickel ore created by China and a surge in Philippines ore exports.

Contrary to earlier expectation, there has been no supply shortage. Sensing the evolving market fundamentals, funds booked profit and prices fell sharply to pre-ban levels. A fall in stainless steel demand put additional downward pressure on nickel prices. A recovery in nickel prices has been delayed due to overhang of stocks. Prices are currently around $13,500/tonne – well below the $18,000 levels seen a year ago.

What are the price prospects for nickel in the second half of this year and into 2016? From a medium-term supply perspective, it is important to remember that the current market conditions are sure to deter investment until prices recover. Failure of some major greenfield projects as well as massive rise in cost of production outside of China has discouraged fresh investment.

Experts point out that the marginal cash cost of producing nickel will be as high as $20,000. In other words, prices will find support at well above the marginal cash cost of production. On current reckoning, nickel is expected to gradually move into a structural deficit sometime next year pushing prices higher out to the year 2020. Currently, there are not enough large-scale projects to meet expected demand growth.

While the supply side projections point to gradually emerging tightness and potential for rising prices, the demand side is tough to gauge. The future of nickel demand, and hence prices, is inevitably tied to the future of the Chinese stainless steel industry. There is already a perceptible shift from investment-driven growth model to a more sustainable model based on consumption and innovation.

Some analysts claim that there is a significant degree of uncertainty for market balances and nickel prices in the years ahead. If demand expectations remain tepid, then prices will be trapped in the $14,000-15,000 a tonne range. As in many other cases, China holds the key to future price movements of nickel.

Copper prices steady as China rate cut fans demand concerns

London copper was steady on Monday after top metals user China had cut the interest rates during the week-end, raising concerns about the extent of a slowdown in demand in the world’s top metals consumer.

China had cut interest rates for the third time in six months on Sunday to lower companies’ borrowing costs and stoke a sputtering economy that is headed for its worst year in a quarter of a century.

“There’s obviously a bit of caution around, which is the right stance … but I think the overall macro trends we’re seeing are likely to offer support this week,’’ said analyst Daniel Hynes of ANZ in Sydney.

“Despite the weaker data points in the US, the broader trend is improving, and in China, anecdotal reports we hear are more positive than a few months ago … so the combination should see broad support for the commodity complex.’’

Three-month copper on the London Metal Exchange was flat at $6,392 a tonne by 0735 GMT, after ending last week little changed. LME copper hit its highest for the year at $6,481 a tonne on May 5.

The most-traded July copper contract on the Shanghai Futures Exchange slipped 0.2 per cent to 45,790 yuan ($7,375.73) a tonne.

Hedge funds and money managers added to net long positions in copper futures and options in the latest week, US data showed.

In other metals, LME nickel extended gains into a fourth week, climbing 0.8 per cent to $14,420 a tonne.

“The technical picture is improving as investment funds and momentum traders … push the price higher,’’ said broker Triland in a note.

ShFE nickel ended 1.9 percent higher as local players rush to source Chinese brands for delivery against the new futures contract.

US jobs growth rebounded last month and the unemployment rate dropped to a near seven-year low, suggesting underlying strength in the economy at the start of the second quarter as focus shifts to reports this week that may show the euro zone is finally shaking off half a decade of torpor.

“The recovery (in base metals prices) has been largely driven by sentiment rather than underlying physical demand,’’ said Capital Economics in a research note. “As such, there is a risk of a pull back in the near term.’’

Japan, Europe against India’s ‘safeguard’ probes on steel imports

The EU and Japan have criticised India for “frequent and frivolous” use of safeguard measures — imposition of higher duties to protect domestic industry against import surges — and have asked New Delhi to review its use of the tool.

The countries also questioned India’s recent safeguard investigation on certain steel products, in a recent meeting of the WTO’s Committee on Safeguards.

“The EU has alleged that many of the investigations have been initiated on weak grounds and asked India to review its use of safeguard measures,” an official who attended the meeting told Business Line.

Of the total 30 safeguard actions notified by countries at a recent meeting of the WTO’s Committee on Safeguards, India accounted for five, but later dropped two.

In 2014, too, safeguard investigations initiated by India were one of the highest at 14.

Japan, the EU and Russia expressed concerns about India’s safeguard investigation on seamless pipes, tubes and hollow profiles of iron or non-alloy steel, arguing that imports had not surged.

India, in its defence, said that while imports had decreased, they were still sufficiently high compared to the base year. A number of members, including the US and China, are affected by duties on steel products.

Safeguard duties, which are basically levies in addition to the existing import duties, can be imposed on items that witness a surge in imports, thereby hurting the domestic industry.

Easy to establish

India has been depending more on this measure to protect its domestic industry as it is easy to establish. Imposing anti-dumping duty, which is the other form of penal duty that the WTO allows, is more difficult as one has to prove that the imports are actually happening at prices lower than what is being charged in the seller’s home country.

“India is very careful that all conditions laid down by the WTO are met before safeguard duties are imposed. It abandons a lot of investigations when there is room for doubt,” a Commerce Ministry official said.

India announced at the meeting that it had terminated its safeguard investigation on cold rolled flat products of stainless steel. Japan welcomed the announcement but said it still has systemic concerns about India’s safeguard investigations.

The country also announced termination of its safeguard investigation on slabstock polyol, used in manufacture of pillows and mattresses. It is mostly imported from the US and Japan.


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