INDUSTRY UPDATES - 10/05/2013

Refined sugar falls to 3-month low on speculations of increased supply

White, or refined, sugar fell to the lowest level in more than three months in London on Thursday on speculation of increased sales from the world's refiners and from Thailand, the second-biggest shipper, to supply Ramadan. Cocoa dropped.

Millers in Thailand have had an incentive to re-melt raw sugar into the white variety, Kona Haque, an analyst at Macquarie Group, said at a media briefing on Wednesday. Sugar productionin the country is running at 4,000-6,000 tonne a day as mills re-melt raw sugar, FO Licht GmbHsaid on May 2.

Production will be 10.1 million tonne this season, up from a previous forecast of 9 million tonne and near the record 10.2 million tonne in 2011-12, according to Somsak Suwattiga, secretary general of the Office of the Cane and Sugar Board. "There are concerns that Thailand is upping their crush to make supplies more readily available for July's Ramadan demand increase, and that this early production is leading to a glut in the market over the near term," Sterling Smith, a futures specialist at Citigroup in Chicago, said in a report e-mailed on Wednesday.

White, or refined, sugar for delivery in August fell 0.3 per cent to $485.70 a tonne by 10:30 am on NYSE Liffe in London. The price touched $484.90 a tonne, the lowest since January 25. Raw sugar for delivery in July slid 0.2 per cent to 17.43 cents a pound on ICE Futures US in New York. Trading volumes in New York were 60 per cent lower than the average for the past 100 days for this time of day, according to figures compiled by Bloomberg.

White sugar for August delivery became cheaper than the October futures on Wednesday, a market structure known a contango that may indicate ample supplies. The August contract was $1.90 a tonne cheaper than the futures for October. A rush to meet Ramadan demand is creating a "supply glut near term", Nick Penney, a senior trader at broker Sucden Financial in London, said in a report.

Muslim nations usually stock up on sugar before the fasting month of Ramadan, which begins in July. While people fast during daylight hours, sweet treats are common at night. The premium white sugar futures command over the raw variety fell 14 per cent so far this month to $101.54 a tonne. Thai producers have been "blamed for knocking down the white premium", according to Michael McDougall, head of the Brazil desk at broker Newedge Group in New York.

Robusta coffee futures for July delivery slid 0.3 per cent to $2,000 a tonne on NYSE Liffe.Arabica coffee futures for July delivery were 0.5 per cent lower at $1.435 a pound on ICE. Cocoa for July delivery fell 0.3 per cent to 1,553 pounds ($2,417) a tonne in London. Cocoa for July delivery slipped 0.3 per cent to $2,385 a tonne in New York.

Minor fluctuations seen in rice market

Rice market may continue to rule around current levels with marginal fluctuations in coming days, said market experts.
Rice market witnessed a mixed trend with reduced offtake pulling aromatic and Sharbati rice varieties down by Rs 50-100 a quintal, on Thursday, while all other non-basmati varieties managed to rule firm at their previous levels.
Amit Chandna, Proprietor of Hanuman Rice Trading Company, told Business Line that absence of bulk buying mainly pulled rice prices down.
Though prices rose on a few occasions, the market did not manage to retain those levels. Restricted availability of stocks is limiting the fall, he said.
It is unlikely to see any major alteration in coming days and market may continue to rule around current levels with marginal alteration, said market sources.
In the physical market, after witnessing an uptrend earlier this week, Pusa-1121 varieties eased by Rs 50-100 a quintal.
Pusa-1121 (steam) went down by Rs 100 and sold at Rs 8,000 while Pusa-1121 (sela) quoted at Rs 7,050, Rs 50 down from previous levels.
Pure basmati (raw) moved down by Rs 100 and quoted at Rs 8,900 . Duplicate basmati (steam) traded Rs 50 down and sold at Rs 7,050 .
On the other hand, moderate buying kept brokens unaltered.
For the brokens of Pusa-1121, Dubar quoted at Rs 4,100, Tibar sold at Rs 4,950 while Mongra was at Rs 3,100 a quintal.
In the non-basmati section, Sharbati failed to retain its previous levels while PR and Permal varieties managed to maintain their previous levels on steady demand.
Sharbati (steam) moved down by Rs 75 and quoted at Rs 5,400-5,425, while Sharbati (sela) was at Rs 5,050 – Rs 50 down.
After witnessing a prices earlier this week, PR14 (steam) remained unchanged and sold at Rs 3,350.
While Permal and other PR varieties continued to rule flat.PR-11 (sela) sold at Rs 3,400-3,450 while PR-11 (Raw) quoted at Rs 3,100-3,150.
Permal (raw) sold at Rs 2,600 while Permal (sela) went for Rs 2,470 a quintal.

Spot sugar tows futures, gains

Sugar prices rose in the futures market for the second consecutive day by over Rs 30 for a quintal taking the total rise to Rs 50 in last two days.
Mill tender rates were up by Rs 5-10 a quintal as most of the Maharashtra’s markets were closed in protest against the Local Body Tax.
Since May 1, there have been no new arrivals or local dispatches of sugar at the Vashi market.
While at upper level 14-16 mills offered tenders and sold about 28,000 – 30,000 bags at Rs 2,930-3,010 (Rs 2,920-3,000) for S-grade and Rs 3,010- 3,060 (Rs3,000 - 3,060) for M-grade.
On the NCDEX, sugar June futures was higher by Rs 31 to Rs 3,005, July contracts increased by Rs 33 to Rs 3,043 and August inched up by Rs 34 to Rs 3,090 till noon.

ArcelorMittal beats profit estimates, sees better second quarter

ArcelorMittal, the world’s biggest steelmaker, posted first-quarter earnings that beat estimates and forecast higher profit in the second quarter.

Earnings before interest, taxes, depreciation and amortization (Ebitda) fell to $1.57 billion in the first three months of the year from $2.12 billion a year earlier, ArcelorMittal said on Friday in a statement. That beat the $1.32 billion median estimate of 12 analysts surveyed byBloomberg.

“Economic conditions remain challenging but our performance in the quarter reflects the results of the management action we have taken to confront the effects of the financial crisis,”

Lakshmi Mittal, chief executive officer of the Luxembourg-based company, said in the statement.
Steel-industry earnings have slumped as Europe’s economic crisis saps demand and slower Chinese growth weighs on commodity prices. European steelmakers are grappling with excess capacity that’s pushed down prices as operating costs climb. The region has capacity to make about 210 million tonnes of steel a year, while demand in a normal market is 150 million to 160 million tonnes, according to industry lobby group Eurofer.

ArcelorMittal said second-quarter Ebitda will exceed the first-quarter result. In February, it said earnings will recover in 2013 after posting the lowest full-year profit since 2009. The steelmaker said in March it expects global steel consumption to rise 3% to 3.5% this year, while European demand will slide to a low before rebounding next year.

ArcelorMittal’s net debt fell by $3.8 billion during the first quarter to $18 billion. The company is seeking to reduce borrowings after its credit rating was cut to junk by Moody’s Investors Service, Standard and Poor’s and Fitch Ratings.


The steelmaker has scaled back its dividend and sold assets, including a $1.1 billion stake in its Canadian mining business. It raised about $4 billion in a sale of shares and bonds in a bid to pare debt to $17 billion by the end of June.

Rio Tinto sees iron ore demand intact

Reuters reported that Rio Tinto is keeping output expansion plans for the steelmaking raw material intact with global demand led by top market China likely to keep growing, albeit at a slower pace.

A senior company official said that the Anglo Australian miner is boosting iron ore production by 70 million tonnes a year that will take output to 360 million tonnes annually by 2015.

Mr Alan Smith head of iron ore marketing in Asia said that "In this decade we, Rio Tinto, expect Chinese steel demand to continue to grow on average about 3% per annum. The miner expects seaborne iron ore demand to grow by 800 million tonnes in the current decade, justifying Rio's plans to continue boosting output.”

Rio Tinto led by former iron ore head Mr Sam Walsh who took over as chief executive this year has vowed to cut more than USD 5 billion in costs by the end of 2014. So far, the company has slashed hundreds of jobs and marked copper, coal and aluminium assets for sale or closure. 
Its optimism on iron ore, which contributed 46% to revenues for the latest half year, seems warranted at least for now .
ArcelorMittal urges Europe to cut energy costs
AFP reported that the head of steelmaking giant ArcelorMittal recently called on European decision makers to cut the costs of energy prices to make the steel sector more competitive as the group faces another tough year owing to slumping demand.

Speaking at a shareholders meeting in Luxembourg, Mr LN Mittal said that his company expects steel demand to fall by 0.5% to 1.5% this year, while warning that the first financial indicators for 2013 are already looking dire.

Mr Mittal said that "We think the contraction will continue and that the Eurozone will stay in recession in 2013. Demand has plummeted by 30% since 2008.”

He said that "The question is how to make existing activities more profitable. We need a clear plan for improving the very high energy prices in Europe."

ArcelorMittal's Q1 results are to be published on Friday

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