INDUSTRY UPDATES ON 8TH APRIL, 2013

Sugar succumbs to profit-booking in futures trade

Amid profit-booking by speculators and ample supplies in the spot market, sugar futures prices today fell by Rs 10 to trade lower at Rs 2,948 per quintal as speculators.

However, the government's decision to partially decontrol the sugar sector, limited the fall.

At the National Commodity and Derivatives Exchange, sugar for delivery in May traded Rs 10, or 0.34 per cent, lower at Rs 2,948 per quintal, with an open interest of 49,720 lots.

The sweetener for delivery in April also fell Rs 7, or 0.24 per cent to Rs 2,894 per quintal after rising to Rs 2,894 in an open interest of 9,680 lots.

Marketmen attributed fall in sugar prices at futures trade to profit-taking by participants after recent gains on the back of partial decontrol of the sugar sector by the government.

In a major reform, the government last week had partially decontrolled the Rs 80,000-crore sugar sector by giving freedom to millers to sell in the open market and removed their obligation to supply the sweetener at subsidised rates to ration shops.


Tata Power faults Reliance Infra’s tariff proposal

The turf battle between the two private sector electricity distributors (discoms) in Mumbai has intensified with Tata Power accusing Reliance Infrastructure of misleading the public and resorting to backdoor tactics to inflate tariff.

Tata Power has already launched a customer acquisition campaign to woo customers to its network. In the last three months, the company said it has got 26,536 customers to switch over to its network and claimed that it has a further 15,000 applications seeking to shift.
Soyameal exports slide by 12% in FY13

Soyameal exports from the country fell by over 12 per cent to 34.33 lakh tonnes in the 2012-13 fiscal on sluggish supply of soybean, while shipments to Iran grew exceptionally, an industry body SOPA said. Soyameal exports stood at 39.14 lakh tonnes in the year-ago period, it added.

“...export of soyameal suffered during the second quarter due to poor availability of soyabean and acorresponding corresponding lower crushing,” the Soybean Processors Association of India (SOPA) said in a statement.

Maximum exports of soyameal were to Iran at 8,38,454 tonnes, followed by Japan at 6,00,021 tonnes and France 2,81,255 tonnes during 2012-13 fiscal, it said.

Soyameal is is mainly used as animal feed. It is made out of soyabean. Soyabean production in the country is estimated to be higher at 12.95 million tonnes in 2012-13 crop year (July-June), as per the Agriculture Ministry forecast.
Wheat remains weak on supply pressure

Wheat remained weak for the second straight day and prices fell by another Rs 20 per quintal on the wholesale grains market on Saturday on adequate supplies following arrivals of new crop from some producing belts.

However, other grains traded in a tight range in restricted buying and closed at previous levels. Marketmen said supply pressure due to arrivals of new crop from some growing regions mainly kept pressure on wheat prices.



In the national capital, wheat dara (for mills) fell further by Rs 20 to Rs 1,520-1,525 per quintal. Atta chakki delivery followed suit and traded lower by the same margin to Rs 1,525-1,530 per 90 kg.

The following are today’s quotations per quintal: Wheat MP (deshi) 2,060-2,260, Wheat dara (for mills) 1,520-1,525, Chakki atta (delivery) 1,525-1,530, Atta Rajdhani (10 kg) 210, Shakti bhog (10 kg) 210, Roller flour mill 800-820 (50 kg), Maida 850-880 (50 kg) and Sooji 960-990 (50kg).

Basmati rice (Lal Quila) 10,000, Shri Lal Mahal 10,000, Super Basmati Rice, 9,500, Basmati common new 7,800-7,900, Rice Pusa-(1121) new 7,300-7,900, Permal raw 2,250-2,300, Permal wand 2,450-2,550, Sela 3,500-3,600 and Rice IR-8 1,800-1,850.

Bajra 1,440-1,445, Jowar yellow 1,500-1,550, white 2,250-2,450, Maize 1,500-1,510, Barley 1,380-1,400, Rajasthan 1,080-1,090.

Spot coking coal on sluggish Chinese buying

Tailspin continued unabated in coking coal market. As usual China played the key role in tilting the market sentiments as its appetite ebbed on slow steel demand and plummeting price.

Chinese mills are struggling with high inventory levels. In a bid to retrieve the damage production pruning is obvious recourse. Daily crude steel production has declined by 1% from early March to 2.0637 million tonne. Decline in domestic average daily crude steel production was primarily a result of major steelmakers arranging overhauls amid deteriorating profitability caused by high raw material prices and low finished demand.
Coking coal inventory bloated in backlash obviating the need to indulge in buying with liquidation of existing stock gaining primacy.

Spot coking coal price levels remained about USD 20 per tonne below the Q2 price of USD 172 per tonne, FOB. Sense of diffidence gripped the miners as they shyied from making any offers rather waiting for bids to decide transaction levels.

Situation is unlikely to improve in the short run with Chinese steel prices showing no sign of turnaround.

Steel Spot Transaction Center opens in Dalian

The Dalian Port Steel Spot Transaction Center embraced its opening ceremony on Nov 21. Mr Sun Guangtian deputy mayor of Dalian, attended the ceremony.

New Business reported that the center, run by Dalian Port Co's wholly-owned subsidiary, Dalian Port Steel Trade Service Co, is a new steel spot transaction platform. Based on resources provided by the Port of Dalian and the Northeast Asia Spot Commodity Exchange, the center aims to facilitate the development of the steel trade logistics industry in the city.

The center will provide services such as financing, transaction and settlement, storage, and supporting processing and logistics distribution. It will also serve as an electronic trading platform.

Dalian Port Group aims to build it into a steel trade and logistics distribution center that changes the traditional steel spot transaction model in Northeast China and greater Northeast Asia.

It will help the Port of Dalian shift its focus on loading and unloading to logistics, trade and industries.

Chinese steel traders suffer due to current trading model



At 11th International Steel Market and Trade Conference held in the southern Chinese city of Guangzhou, Zhang Jinghua, the vice president of Beijing-based state-owned Sinosteel Corporation, stated that China’s steel trading sector is currently characterized by fierce competition with over 200,000 steel trading enterprises competing together in the sector.

He went on to state that in Japan the steel trading model is different from that in China. 80 to 90% of steel produced by Japanese steelmakers is sold via Japanese steel trading companies, adding that the Japanese traders also contribute to the development of products and markets, in addition to selling products, instead of just purchasing at lower prices and selling at higher prices as in China. Japanese steel trading companies earn commission charges instead of just the profit they can make on sales, and so they do not have to bear high price risks in the steel market.

In China, on the other hand, Mr. Zhang said that steelmakers and steel traders are more like competitors as steel traders bear by themselves the responsibility for distribution and they have to pay in advance in order to book materials. Rapid price changes give rise to high risks, and sometimes the steel traders’ booking prices may be higher than their selling prices in the spot market. In 2012, many steel traders exaggerated their sales figures, which eventually caused banks to set higher qualification thresholds for steel trading companies looking for loans. This had a serious impact on credit availability in the steel trading sector, causing a number of steel traders to go bankrupt or incur huge losses.

Several steel traders at the conference told SteelOrbis that they have concerns about the situation in the steel trading sector and that they expect a better model to be developed instead of having to survive just on earnings on the difference between their purchase prices and sales prices. They also said the higher prices of booking steel supplies at present mean that they are currently going through a difficult time.



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