China, India should invest in junior potash groups

6th Mar 2013, by Agrimoney
The purchase by an Indian fertilizer group of a stake in potash prospector Karnalyte Resources is to set a trend, with tie-ups between junior miners and cash-rich importing countries solving headaches for both sides.

The continued decline in potash prices - to some $450 a tonne in Vancouver, from $500 a tonne a year ago, on PotashCorp data – has choked off small potash groups' supply to capital by shrinking hopes for returns from investments in new mines.

Last year, shares in junior miners fell by 20-67%, compared with an 11% drop in the price of stocks in large players, such as Canada-based PotashCorp, Germany's K+S and US-based Mosaic, according to Rabobank.

Even some large mining groups are rethinking potash plans, with Brazil's Vale putting its 2.9m-tonne Kronau project in Canada on hold, and Anglo-Australian giant BHP Billiton delaying a decision on the next round of investment into its 8.0m-tonne Jansen scheme, also in Canada.

'Oligopolistic supply structure'

However, this drop in potash prices has, ironically, been only a mixed blessing to buyers too.

While lowering bills for now - as highlighted by recent import orders signed by China and India, the top two potash-importing countries – the hurdles to fresh mines look set to reassert the hold on the market of the Canpotex and BPC marketing cartels, whose members include the likes of PotashCorp.

"The weaker prospects for new players entering the market certainly raise the changes of the oligopolistic supply structure surviving in the long term," Rabobank analyst Rakhi Sehrawat said,

"This does not bode well for large potash importers as they will eventually be left in a position of price-taker when global potash demand recovers."

With potash demand growth of 3% putting that recovery on the cards "in the medium term", the "tightly-balanced outlook prompts the question whether larger importers of potash, such as India, will ever get respite from the controlled supply structure."

Good for both sides

The solution, Rabobank said, was for importing countries to engage a long-term focus and invest in junior miners – providing the capital to get greenfield projects running, and reducing their vulnerability to the whims of the large groups.

"To secure long-term supply at a reasonable price, it has become imperative for large potash importers to facilitate supply development… by pumping in financing, entering supply contract agreements, or acquiring existing mines," Ms Sehrawat said.

With the big importers of BRazil, China and India set to rely 30% more on foreign purchases by 2020, totalling some 23m tonnes, "this puts the spotlight on these importers to re-evaluate their long-term position.

"In order to increase their 'walk away' factor in futures negotiations [with potash cartels] and put a cap on potash prices, importers need to build a more balanced potash supply mix."

Already started?

The comments follow Karnalyte Resources' announcement in January that it had sold a 20% stake in its Canadian potash mining project to India's Gujarat State Fertilizers and Chemicals, which also negotiated an offtake agreement of 350,000 tonnes a year.

Karnalyte revealed earlier this week that a second potash buyer is close to making a similar deal.

Meanwhile, Chinese investors are backing projects in the nascent producing country of Laos

And China's Sichuan Chemical Industry Holding Group has signed a $2bn supply deal with US-based potash exploration group Prospect Global Resources to take 500,000 tonnes of potash a year fir a decade.

Brazil, US face autumn battle in soybean exports

6th Mar 2013, by Agrimoney
US farm officials forecast a tough autumn battle between Brazilian and US soybean exports, as the South American country attempts to make up for a poor start to 2012-13, with shipments hurt by logistical hiccups.

US Department of Agriculture staff in Brasilia, while cutting their forecast of the Brazilian soybean crop to 82.5m tonnes, stood by a forecast of soybean exports of 39.0m tonnes for 2012-13.

The export figure represents a record, by a distance, even though coming in 875,000 tonnes below the USDA's official forecast, on the basis of a February-to-January marketing year.

The report also follows the release of government data showing that Brazilian soybean shipments, dogged by "deficient port logistics", poorly maintained roads and rail bottlenecks, had fallen below 960,000 tonnes last month from 1.57m tonnes the year before.

Many commentators had been expecting a figure near to 2m tonnes.

Late export season?

The USDA staff said in a report: "Traders hope to offset the slow early export season with stronger exports in September and October," a period when US supplies would typically be building with the onset of its own harvest.

Indeed, the briefing noted the need for Brazil's supplies to be "price competitive with the upcoming US crop".

Brazil's price keenness was being assisted by the weakness of its currency.

"The continued exchange rate of the Brazilian real vis-à-vis the US dollar at around R$2.00 to $1.00, coupled with less competitive crush margins, has continued to favour exports."

'Tremendous waiting times'

The comments come amid continued orders for US soybeans, despite their thin supplies and relatively high prices - demand attributed largely to the difficulty in obtaining soybeans from Brazil, with ship waiting times at ports estimated at some 60 days.

Chris Mahoney, the director of agricultural products at Glencore, on Tuesday underlined the extent of Brazil's infrastructure shortfall, flagging "tremendous waiting times" in the port of Paranagua, which he estimated rising from 20 days at peak time in 2011 to 45 days last year.

"I think 2013 will be considerably worse because we have a very large crop in Brazil," he told investors.

The USDA report said that ship waiting times have "never been seen to this degree so early in the season", with queues normally not beginning to lengthen until March or April, when the start of the cane crushing season, and ramp up in sugar exports, adds to the pressure on logistics.

'Very positive margins'

In the latest evidence of the clamour for US soybeans, the USDA on Tuesday revealed the sale of 330,000 tonnes of 2012 crop to an "unknown" foreign buyer, suspected to be Chinese.

"Soybean crush margins throughout the world are very positive and crushers do not want to miss out on any of these positive margins," Darrell Holaday at Country Futures said.

"Chinese crushers do not want to hear about shipping delays out of Brazil. That is why they are pushing to buy US soybeans. "

The US has already shipped more than 1.1bn bushels of soybeans in 2012-13, and has commitments for getting on for a further 200m bushels, meaning that half way through the season it may have just about wrapped up a full-year export programme the USDA has estimated at 1.35bn bushels.

The strong demand has raised ideas of the US being forced to turn to South American imports itself late in the season to tide crushers over while they await the next American harvest coming onstream.

Key reports ahead

The US Department of Agriculture on Friday releases its latest Wasde crop report, at which the US soybean balance sheet, and estimates for Argentine and Brazilian crops, are expected to be highlights.

On Thursday, Conab, the Brazilian crop bureau, will also update its forecast.

The USDA's current estimate is 83.5m tonnes, with Conab's at 83.4m tonnes.

*Separately, Lanworth on Wednesday trimmed by 200,000 tonnes to 80.8m tonnes its forecast for Brazil's soybean harvest.

Crop hopes, firm dollar and cash switch send grains tumbling

6th Mar 2013, by Agrimoney
Wheat prices slumped again, to a fresh eight-month low, this time taking corn with them, as a stronger dollar added to pressure from an exodus of investors to equities, and hopes of a sharp rebuild in crop supplies.

Chicago wheat for March closed at $6.76 ¼ a bushel, down 2.9% on the day.

The better-traded May lot ended down 3.2% at $6.83 ¾ a bushel.

The sell-off extended a four-month losing streak which has already cost the grain more than one-quarter of its value, compared with its November high.

'Never good for grain prices'

While corn futures have stood relatively firm over these months, protected by the thinness of US supplies, their fall was on a part with wheat's this time, with Chicago's March contract finishing down 3.3% at $7.08 a bushel, and May corn 2.9% lower at $6.88 ½ a bushel.

"There are a whole lot of things affecting the market," Mike Mawdsley at Market 1 said, pointing to factors including the rains refreshing drought-hit areas of the US, so improving crop prospects, and the talk of investors switching from commodities to equities, which extended gains.

Wall Street's Dow Jones Industrial Average share index hit a fresh record high of 14,320.

Ideas of investors turning their back on commodities gained support from data showing that February witnessed the greatest outflow of cash from gold exchange traded funds (ETFs) on record, taking the total this year to the equivalent of 140 tonnes.

Commodities overall, as measured by the CRB index, lost 0.6%.

Spreads unwound

"The dollar is higher – that is never good for grain prices," Mr Mawdsley said, making them less affordable for buyers in other currencies.

He also cited the prospect on Friday of a US Department of Agriculture Wasde crop report – a highpoint of the commodities calendar, whose imminence often prompts profit-taking.

This time the bull spreads in corn futures – the rising premium of the spot March contract over more distant lots – was seen as the primary target in the firing line, closing by some 20% as of late deals.

This spread had proved a winner, boosted by ideas of a reluctance by farmers to deliver corn against Chicago futures (or indeed, anywhere), catching holders of short positions in the expiring March lot in a short squeeze.

'Dead in the water'

And then there are the hopes for better crops this year, both in the US and abroad.

In the US, "the only likely setback at the moment is that the South East is too wet, which could delay spring planting", Mr Mawdsley told Agrimoney.com.

"Other than that, we are dead in the water."

At US Commodities, the broker's president, Don Roose, said that improved weather was the "dominant feature", with rains [outside the South East] welcomed by farmers as replenishing soil moisture just in time.

At Martell Crop Projections, Gail Martell said: "Stormy winter weather has led to a moisture surplus in the central US, easing concerns over drought in winter wheat."

Oklahoma, where drought-pressed winter wheat seedlings are staging a rapid recovery, "received 4.3 inches of winter precipitation, 34% above normal".

Consultancy Lanworth raised by 116m bushels to 2.026bn bushels its forecast for the US wheat harvest this year.

'Production at full throttle'

And hopes for crops are increased abroad too, even if old crop stocks remain tight.

Mr Roose noted a "lot of competition in the world.

"We have had high enough grain prices for long enough that a lot of producers in other countries have raised production to cash in on high values.

"Production is at full throttle, which could leave use with corn and wheat stocks turning out burdensome".

Besides ideas of India hiking wheat exports, to erode stocks which have hit four times the government target, there are ideas that Ukraine might reopen to shipments, following a good start for its 2013 crops.

Lower wheat prices were reflected globally too, with London wheat for May closing down 2.0% at £200.00 a tonne, and its Paris peer down 1.6% at E232.50 a tonne.

Ethanol factor

Corn's worse performance over wheat was a reflection in part of US ethanol data deemed disappointing, with production falling 7,000 barrels per day last week to 805,000 barrels per day, after four weeks of rising output.

Production at that level remains below that needed to meet US Department of Agriculture forecasts for 2013-14.

Furthermore, ethanol appears to be being made increasingly out of wheat rather than ethanol, with Poet, which was on Tuesday said to be bidding for wheat for its Ohio facilities, on Wednesday revealed to be seeking the grain at an Indiana plant.

Brazil vs US

Soybeans at least managed less severe losses, ending down 0.8% at $14.84 ½ a bushel in Chicago for March delivery, and by just 0.5 cents at $14.66 a bushel for the May contract.

"Soybeans are softer after yesterday's rally, triggered additional producer selling, with news stories floating softer pork prices had Chinese soybean and soymeal markets weaker as well," Benson Quinn Commodities said.

Furthermore, USDA staff in Brasilia laid out the prospect of a tough battle between Brazilian and US soybeans in export markets come September.

American supplies then usually take over the reins in export markets, but Brazil looks like having a stack of export sales to complete, following a weak start to shipments, blamed on port bottlenecks.

'Remaining sugar spoken for'

Against that backdrop, the declines in soft commodities looked pretty pedestrian, even a 0.8% decline to $2,042 a tonne in May cocoa in New York, after hitting $2,038 a tonne earlier – the lowest level for a nearest-but-one contract since June last year.

The bean is being sunk by ideas that West African crops, the world's most important, will not be as weak as investors had initially expected.

Already, ideas of the world deficit in 2012-13 have fallen to some 50,000 tonnes, from levels of 100,000 tonnes or more common late last year.

New York raw sugar for May fell, but by the slimmest margin of 0.01 cents, to 18.19 cents a pound, while London white sugar added 0.3% to $518.20 a tonne.

Indeed, "continuing strength in the white sugar flat price and front spread - suggesting either nearby demand for refined sugar, or a lack of availability of the product - is dissuading the long term bears to add to short positions" in the sweetener, Nick Penney at Sucden Financial said.

"In the background, continued talk of ethanol potentially being the focus for production in the early stages of the Brazil Centre South new harvest," besides the country's logistical problems and "the perception that the remaining sugar from last season is spoken for, has contributed to the support in flat price".

Benefits of higher soya export to Iran

TEJINDER NARANG, THE HINDU BUSINESS LINE
6, MARCH 2013

Post-sanctions, India has an edge over suppliers in North and South America.
Iran’s worldwide imports of soyameal are close to 2.2 million tonnes annually.

This year, Iran will procure higher supplies of Indian soyameal — estimated at 0.8 million tonnes by March 2013 and 0.75 million tonnes during the leaner season of April-September 2013.

This is despite the crop of beans in Brazil, Argentina and the US that will be harvested and crushed from April onwards.

Notwithstanding that South American prices are about 10-15 per cent cheaper now and future charts are displaying signs of further weakness in values in the coming months, India geographically enjoys an inherent freight advantage with the West Asian countries vis-a-vis South America.

INDIA’S ADVANTAGE

The indicators are already flashing — during April 2012-January 2013, exports to Iran touched 5,40,000 tonnes, against 2,30,000 tonnes in 2011-12.

For February-March 2013, an export of 3,00,000 tonnes (or 1,50,000 tonnes/month) is expected. The trend may continue, as Iran’s public and private sectors intend to aggregate more than adequate stocks for their food-related items to meet any exigencies.

Prior to February 6, 2013, India’s crude import from Iran was a mix of payments in hard currency and rupees in the ratio of 55:45.

Thereafter, US’ stringent enforcement of sanctions mandated international trade with Iran in local currencies — with zero component of dollars or euros, except on humanitarian grounds for food and medicinal purposes.

Since dollars or euros may not be adequately available when Iran’s crude exports are squeezed, import of foodgrains, meal and edible oil cannot easily be transacted from the American hemisphere, unless the goods are bartered.

The scarcity of foreign exchange with Iran can be inferred from the weakening of its local currency.

The Indo-Iran bilateral rupee payment arrangement, which now provides for 100 per cent rupee trade, will ensure substantial diversion of trade to India with an added pull for soyameal.

China and Iran, too, have a local currency arrangement, but China holds a surplus in trade with Iran, whereas Iran has a $12-billion surplus with India. Iranian glut of rupee funds is already banked with India’s UCO Bank.

SOYAMEAL SCENARIO

Iran has to cover its demand of meal for its livestock and has few sourcing options other than India. Even basmati rice exporters are enlarging their export basket by pushing soyameal exports.

The advantage here is that Indian sellers and Iranian buyers of basmati rice are familiar with the procedural pattern of Indo-Iran trade and payment mechanism due to four years’ experience in trading the “1121” variety of basmati rice.

Tentatively, shipments of an “additional” one million tonnes to Iran are not ruled out for the April-September 2013 period.

Decline in soyameal shipments to Japan and Vietnam this year may, therefore, be compensated.

Exports of about 4 million tonnes (1.5 million tonnes to Iran and 2.5 million tonnes to other destinations) are achievable in 2013-14, out of total production of about 8 million tonnes. Farmers and producers who held back beans or accumulated inventory of meal in anticipation of better realisation due to Iranian purchases may also have to contend with the falling trend in world prices, which will be a limiting or negative factor.

World soyabean prices are estimated to fall by 20- 25 per cent in the next two quarters. Trading profits are thus a challenge and depend upon corporate ingenuity to manage local procurement efficiently.

MNCs, who may have otherwise sourced soyameal for Iran from South America in April-September, have also diverted their business through Indian intermediaries or sister companies based in India. More action in this segment can be expected.

Exports of value added non-traditional items such as soyameal, which is undertaken by private players from open market, will be welcomed by the Indian Government. More crushing of beans will yield more oil, lowering prices of edible oil and bringing down imports.

The soyabean industry, which has flourished in Madhya Pradesh, has been insulated from any direct or indirect policy intervention by the Centre, unlike wheat, rice, maize, pulses, edible oil.

There has not been a ban or restriction on exports, even in the event of prices of beans showing an abnormal rise, as was the case last year. Madhya Pradesh needs to incentivise production of oilseeds or pulses over wheat.

There were some teething problems in 2012 under the Indo-Iran arrangement, causing inordinate delay in disbursement of funds by UCO Bank.

These bottlenecks have now been fixed and authorisation of “debit advice” to UCO Bank for effecting payment is received from Iranian counterparts within 7-10 days, subject to the documentation being compliant with terms of letter of credit.

Moreover, Indian exporters/traders have undertaken additional precautions of insisting on substantial advance payment at the time of contract and the balance upon completion of the shipment.

Therefore, soyameal trade with Iran is an opportunity waiting to be exploited.

(The author is a grains trade analyst.)

CCEA refers wheat export plan to ministers' panel

PTI
NEW DELHI, MARCH 7: 
The Cabinet Committee on Economic Affairs (CCEA) today referred the Food Ministry’s proposal to allow export of additional 5 million tonnes of wheat from the central pool to a Group of Ministers (GoM), which will meet later in the day.

“Cabinet did not take any decision on wheat exports. The matter has been referred to the Group of Ministers (GoM) headed by Agriculture Minister Sharad Pawar,” highly-placed sources said.

The meeting of the GoM, headed by Pawar, is scheduled at 5 p.m. in Parliament, the sources added.

The Food Ministry’s proposal to allow additional 5 mt of wheat export from the Government godowns is aimed at creating enough space for the new wheat crop, which will be procured from this month-end.

To speed up exports, the Ministry has proposed allowing recognised private traders to export the Government-held wheat stocks along with state-run trading agencies such as MMTC, STC and PEC.

So far, the Government has allowed export of 4.5 mt through public sector trading agencies. Of this, about 2 mt has already been shipped at $295-330 a tonne.

The Government had over 30 mt of wheat stock in the Food Corporation of India godowns at the beginning of last month as against the actual requirement of 7 mt the end of this month.

Wheat stocks have piled up in the Government godowns due to record procurement following a bumper crop in the last two years. The Government is aiming to procure a record 44 mt in the 2013-14 marketing year starting April.

Wheat production touched an all-time high of 94.88 mt in 2011-12 and it is estimated at 92.30 mt this year.

CIL to import 20 million tonnes of coal next fiscal

6 MAR, 2013, PTI
NEW DELHI: Coal India, the world's biggest producer of coal, may import as much as 20 million tonnes of the fuel next fiscal to comply with orders to increase supplies to power utilities and avoid paying penalties.

The company scrapped a proposal to import coal this year as it dipped into high inventory to meet requirement of power plants. But next year, when more power plants are likely to be commissioned, it will revive plan to import coal.

"If we produce 492 million tonnes of coal as projected, about 20 million tonnes of import will be required to meet the 80 per cent (of commitment quantities to power producers)," Coal India Chairman and Managing Director S Narsing Rao told PTI in an interview here.

The company has to meet at least 80 per cent of supplies committed in the new Fuel Supply Agreement (FSAs) signed with power firms or face penalties. Any quantity that it is unable to meet from domestic production is to be compensated through imports.

The Maharatna firm has an inventory of 71 million tonnes as of now. Next year, it aims to produce 480-482 million tonnes of coal and dip into inventories for another 10 million tonnes or so. Current year supplies were almost 470 million tonnes.

CIL had anticipated a import of 12-13 million tonnes in the current fiscal. Coal India said that if the company is able meet the level of 492 million tonnes next year and if power plants do not come up as expected, the need for imports might be even less in next fiscal.

Rao said the company did not import any coal in the current fiscal on account of delays in execution of some power plants and it met an average of 91-92 per cent of the committed volumes to power plants.

Tata Power’s Mundra plant goes fully operational

OUR BUREAU, THE HINDU BUSINESS LINE
NEW DELHI, MAR 6: 
Tata Power has synchronised unit five of 800 MW at its 4,000 MW imported coal-based plant in Mundra, Gujarat.

The first four units (800 MW each) have been commissioned between March last year and February this year. With this, the 4,000-MW plant is fully operational and raises Tata Power’s total capacity to 8,500 MW.

With unit five online, the thermal power generation capacity of the company is at 7,647 MW. Generation through clean sources such as hydro, wind and solar add up to 852 MW.

Anil Sardana, Managing Director, said: “The synchronisation of the last unit is a significant achievement in a sector, which is ridden with numerous challenges.

“The Mundra UMPP features a number of advanced technological initiatives based on super critical technology. We eagerly await a viable solution by the CERC and look forward to an early resolution of this issue.”

Tata Power has petitioned the Central Electricity Regulatory Commission seeking higher tariff for electricity generated at its Mundra plant.

EXPORTS FROM INDONESIA

The company had contracted coal supplies from Indonesia at lower than market rates for the project. However, last year, Jakarta mandated that all coal exports from that country should be benchmarked to international prices.

Consequent to the fuel price hike on account of the policy change in Indonesia, Tata Power sought an increase of about 80 paise on the power purchase agreement tariff of about Rs 2.55, citing rise in coal prices caused by the policy change by the Indonesian Government.

The petition has been heard by the Commission and its decision is awaited.

Sardana told Business Line that the company was losing about 50 paise for every unit generated at the Mundra project.

UNIT POSTS LOSS

For Q3 FY13, the power utility’s wholly owned subsidiary Coastal Gujarat Power Ltd, formed to set up and operate the Mundra project, posted revenues of Rs 798.63 crore and a loss of Rs 829.58 crore.

During the quarter, only three units totalling 2,400 MW were operational.

An additional provisioning of Rs 600 crore for recoverability of carrying cost from future earnings has been made during the quarter.

Tata Power said with the impairment, the equity of Coastal Gujarat had eroded substantially and it was awaiting CERC decision on tariff hike to ensure the project’s long-term sustainability.

Weak Global Coal Market Threatens Low-Margin Mines

Henning Gloystein | March 07, 2013
Reuters / The Jakarta Globe
London. Thermal coal producers around the world face the prospect of mine closures as oversupply and weak demand drive down prices towards unprofitable levels.

European and South African physical coal prices have fallen back below $90 a tonne and analysts say that the low prices will hit Australian mines in particular, where miners are also contending with a strong Australian dollar and high costs.

Indonesian producers are also expected to have margins squeezed as low prices coincide with the potential of rising taxation.

Traders said that prices have dropped back to levels that may cause some low-revenue mines to close because they can’t generate profits at such low prices.

“There’s just too much coal around and too little demand, so at some point the mines with the lowest profit margins will have to shut,” one physical coal trader said.

“I think that situation will arrive if physical prices in Europe or South Africa fall below $80,” he added.

April deliveries of South African coal from the port of Richards Bay have dropped to $84 a ton, while April deliveries to Amsterdam-Rotterdam-Antwerp (DES ARA) are down to $86.50 a ton on the globalCOAL trading platform.

At $94.10 a tonne, only Australian coal from the port of Newcastle, New South Wales, is still above $90, benefiting from stronger demand in Asia.

Xavier Prevost, a Johannesburg-based analyst, said that South African producers are profitable at current prices but that miners are likely to receive less for their exports as the northern hemisphere moves from winter into spring and summer.

“We’ll see in two, three months,” he added.

In Indonesia, the world’s top coal exporter, the low prices have come as regulatory costs are increasing.

“The government is currently proposing to raise royalties to 13.5 percent, a move which would seriously damage the profitability of many small-scale Indonesian coal mines,” Australian bank Macquarie said in a research note on Friday.

In Australia, the weak coal market coincides with a strong Australian dollar and high labor costs, pushing some miners into the red.

High supplies, low demand

The low coal prices are a result of healthy export levels from traditional exporters, such as Australia, South Africa and Colombia.

Adding to the glut, the continuing shale gas boom in North America has led to a collapse in domestic gas prices, reducing coal demand and forcing miners to sell abroad, mainly to Europe.

Although European utilities are burning as much coal as they can because it is more profitable to generate electricity from coal than from gas, its main fossil-fuel competitor, the economic slump in Europe is keeping a lid on demand.

The Asian outlook is not much better.

Japan’s power generation in February was down 7 percent on last year, a Reuters calculation based on industry data shows.

In China, meanwhile, a possible change in environmental regulation could lead to further dents in demand.

The world’s biggest coal buyer and burner continues to struggle with rising pollution, much of which comes from coal-fired power stations.

Deutsche Bank said that Australian coal prices would be worst affected if China enforces stricter legislation that weakens its demand for coal, potentially dropping to as little as $72 a ton.

However, such moves in China would also be felt in European and North American coal markets.

“In the Atlantic Basin, we expect South Africa would likely shift its emphasis back to Europe, as its lower cost base would allow it to displace some volume of Russian coal into Europe,” the bank said. “For the United States, the international market would become much less appealing for exports.”

For some, the malaise in coal and other resources markets is partly the result of overinvestment and the failure to rein in supply to protect prices.

Last week Ivan Glasenberg, chief executive of commodities trader Glencore, which is trying to buy miner Xstrata, said that a lack of “capital discipline” among resources companies had contributed to gluts of major commodities including coal.

“The big guys really screwed up,” he said.

— Additional reporting by John McGarrity

BHP responds to China claim of iron ore price manipulation

Thu Mar 7, 2013
* China accuses mega miners of holding back cargoes to boost prices

* BHP says sells large volumes on spot market

* Fortescue says price volatility hurts all

* Platts says iron ore index reflects supply, demand
By Sonali Paul and Manolo Serapio Jr
MELBOURNE/SINGAPORE, March 7 (Reuters) - BHP Billiton said on Thursday it was committed to a transparent iron ore market, responding to allegations by top consumer China that global miners had manipulated the market to drive an 80 percent jump in prices over the past six months.

China's national planning agency said on Wednesday the world's top three miners and some traders had delayed shipments and held back stocks "to send a fake market signal that there was a supply shortage".

The National Development and Reform Commission (NDRC) did not name any miners, but the top three iron ore producers are BHP, fellow Australian miner Rio Tinto and Vale of Brazil, between them producing roughly two-thirds of the world's output.

BHP, the world's third-largest iron ore miner, said it had produced iron ore at full capacity between July and December 2012 and sold all of that material.

"We aim to improve transparency by increasing liquidity in the spot market," BHP said in a statement e-mailed to Reuters.

"We sell significant volumes on a spot basis, including through widely accessible trading platforms, irrespective of the iron ore price," it said.

BHP was the first of the iron ore giants to issue a response to the statement from the NDRC, which came just as iron ore prices have eased off 16-month highs. Vale and Rio Tinto declined to comment.

China as the world's biggest importer of iron ore, taking about two-thirds of globally traded material, China has little choice but to buy heavily from the big three producers. Its iron ore imports soared to 70.94 million tonnes in December, taking purchases to an all-time high of 743.6 million tonnes in 2012.

VOLATILE MARKET

Spot market trades are used to set iron ore index prices, which producers and steel mills in turn use as benchmarks for pricing monthly and quarterly supply contracts.

"It's more the art of war than manipulation," said a commodities analyst familiar with the way Australian iron ore miners price cargoes to China.

"Both sides use the pricing mechanism to their advantage and it's a big money game. If you can extract another 10 dollars per tonne out of your ore, that's a significant margin to make."

The spot iron ore price nearly doubled from three-year lows in September to reach a 16-month high of $158.90 a tonne in early February. The price stood at $145.80 on Wednesday.

World no.4 iron ore miner Fortescue Metals Group, which calls itself a price follower and prices its sales off the indexes, appeared to back the Chinese view that the market was not necessarily transparent.

"The current volatility is not good for suppliers or customers, and we think ultimately the price needs to be a true and transparent reflection of the supply demand balance," Fortescue said in a statement e-mailed to Reuters.

BALANCING THE BOOKS

In response to the planning agency's specific allegation that some miners were buying iron ore cargoes on the spot market in order to lift prices of the key steelmaking material, BHP said it was "very normal" for steel mills, traders and producers "to both buy and sell cargo to balance their books".

"Such transactions occurring on the platforms is to the benefit of all market participants in that it supports transparent market pricing and market liquidity," BHP said.

BHP bought 100,000 tonnes of iron ore in January in a rare move that market participants saw as a strategy by producers to stem a decline in prices.

"We will not comment on what transaction we have or have not done," the company said on Thursday.

China's NDRC also said miners had used a "non-transparent tender process to push up prices", referring to iron ore cargo sales conducted through tenders whose results then influence world iron ore indexes, such as the Platts iron ore index.

Platts responded that its index is an accurate reflection of the market.

"We are confident that our published prices reflect the reality of current supply and demand conditions in the iron ore spot market," said Keith Tan, managing editor for steel raw materials at Platts.

"Iron ore prices have rebounded earlier this year mainly owing to improved manufacturing activity in China, low inventories held by steelmakers, and reduced domestic output during winter," he said.

The attack from the NDRC comes at a time when steelmakers in China, the world's largest iron ore importer, are booking losses as steel demand has fallen and raw material costs have surged.

BHP and Rio Tinto shares were flat on Thursday in a slightly weaker broader market.

Iron Peaked After Restocking Rally, Morgan Stanley Says

By Phoebe Sedgman - Mar 7, 2013
Bloomberg
Iron ore is poised to decline over the rest of the year as global supply increases and a rally spurred by restocking in China ends, according to Morgan Stanley.

The price probably peaked at about $159 a ton last month and will average $129 over the rest of the year, analysts Joel Crane and Peter Richardson said in a report. The raw material may average $133 a ton over 2013, with prices seen dropping to $130 in the fourth quarter from $142 in the first, they said.

Iron ore has rallied 68 percent since September as economic growth in China accelerated and port inventories in the biggest buyer slumped to a three-year low. Morgan Stanley joins analysts from Deutsche Bank AG to Bank of America Corp. forecasting lower prices. Global seaborne supply will gain 9.1 percent this year, topping an 8.3 percent rise in demand, Morgan Stanley estimates.

“The latest data points for steel inventories with traders and mills show that stocks have experienced a typical, seasonal rebuild,” the analysts wrote in the report dated today. “The spot iron ore price likely peaked last month.”

Iron ore with 62 percent content delivered to the Chinese port of Tianjin rose 0.4 percent to $145.80 a dry ton yesterday, according to data from The Steel Index Ltd. The price surged to $158.90 a ton on Feb. 20, the most expensive since Oct. 13, 2011. It bottomed at $86.70 on Sept. 5.

‘Suffer a Bit’

Iron ore may drop to $115 a ton by yearend, Deutsche Bank said March 1. The price may tumble to $70 a ton in the three months to September after trading between $130 and $160 through June, Tom Price, a Sydney-based UBS AG analyst, said Feb. 26.

Vale SA (VALE3), the world’s biggest producer, said Feb. 28 that while first-half prices may be better, they “may suffer a bit” in the second because of supply increases, according to Jose Carlos Martins, head of ferrous and strategy. The Rio de Janeiro-based company reported a record quarterly loss that day.

Swaps show expectations for lower prices this year. The March contract was at $145.50 a ton yesterday, with September’s at $124.50 and December’s at $120.75, according to GFI Group Inc.

Prices tend to ease after the first quarter once mills conclude restocking, National Australia Bank Ltd. said in a March 4 report. The so-called temporary factors underlying the recent rally should taper off, causing prices to drop, it said.

Inventories at Chinese ports rose for a second week to 68.9 million tons on March 1, according to data from researcher Beijing Antaike Information Development Co. Stockpiles fell to 66.89 million tons on Feb.1, the lowest level since January 2010, and remain 30 percent lower than a year ago.

“Indicators of iron ore inventory at the ports show stocks remain well below normal levels, which will continue to provide support,” the Morgan Stanley analysts said. “Chinese steel production remains strong, and will grow 2.6 percent.”

Iron ore is measured in dry tons, or metric tons less moisture. At Tianjin port moisture can account for 8 percent to 10 percent of the weight. Australia and Brazil are the world’s two biggest exporters.

Singh Said to Sell Steelmaker at Four-Year Low: Corporate India

By Rajesh Kumar Singh - Mar 7, 2013
Bloomberg
India is pressing ahead with its plan to sell a stake in the biggest state-owned steelmaker in a race to cap the budget deficit, undeterred by a plunge in the shares to a four-year low.

The government will offer 10.82 percent of Steel Authority of India Ltd. (SAIL) on March 20 to raise as much as 35 billion rupees ($639 million), said two officials with direct knowledge of the matter. Teams comprising officials and bankers left this week on a nine-day roadshow to market shares in Singapore, Hong Kong, Tokyo, New York and London, the people said, asking not to be identified, citing confidentiality terms.

Slowing demand for the alloy in an economy poised to expand at the slowest pace in a decade and rising input costs have driven the stock of the New Delhi-based company 32 percent lower since the end of 2009. Prime Minister Manmohan Singh’s cabinet has twice deferred the sale in the past two years, believing a higher price would help narrow the widest budget shortfall among the biggest emerging economies.

“They ignored better times for the sale when demand was stronger and competition was weaker,” said Abhisar Jain, an analyst at Centrum Broking Pvt. in Mumbai, who recommends selling Steel Authority shares. “The return of those times may be far away. This smacks of despair.”

Share Slump

Steel Authority shares closed at 68.20 rupees on March 4, the lowest level since March 3, 2009, according to data compiled by Bloomberg. They fell 0.6 percent to 70 rupees as of 9:19 a.m. in Mumbai, extending this year’s loss to 21 percent, versus a 1 percent decline in the benchmark S&P BSE Sensex.
(SENSEX)

Finance Minister Palaniappan Chidambaram is under pressure to sell stakes owned by the government in companies including National Aluminium Co. (NACL), MMTC Ltd. (MMTC) and Rashtriya Chemicals & Fertilizers Ltd. (RCF) before the close of the financial year ending March 31 as he staves off a ratings downgrade threat issued last year by Standard & Poor’s and Fitch Ratings.

He cut the revenue target from stake sales for the year to 240 billion rupees ($4.4 billion) from an estimated 300 billion rupees as bureaucratic delays undermined the plan. He said on Feb. 28 that he will narrow the nation’s budget shortfall to 4.8 percent of gross domestic product next year from an estimated 5.2 percent in the 12 months to March 31.

Piling Inventory

Stockpiles at Steel Authority have increased because of a dearth of orders from government infrastructure projects, while competition from Tata Steel Ltd. (TATA), JSW Steel Ltd. (JSTL) and Essar Steel Ltd. has eroded prices of the alloy. The company had about 1.5 million metric tons of unsold stocks as of Dec. 31, more than half of the sales in that quarter.

“The inventory pile-up is raising concern the company’s capacity expansion may get further delayed,” Jain said. “If Steel Authority is unable to use its existing capacity, there’s no point expanding.”

India’s steel consumption rose 4.1 percent in the 11 months ended Feb. 28, according to the steel ministry’s Joint Plant Committee, half the pace the committee had estimated at the beginning of the year and slower than the 5.5 percent growth last fiscal year.

Steel Authority’s profit fell to 4.84 billion rupees in the three months ended Dec. 31, the lowest in more than nine years, dragged down by higher staff and raw material costs and a 6 percent drop in average product prices.

Economy Stimulus

Cash reserves fell more than 30 percent to 59 billion rupees in 2012 from a year earlier amid a decline in earnings and increase in debt to fund a planned expansion. The board has advised that reserves be maintained at about 60 billion rupees, the two people said.

The government’s efforts to kick start the economy and stimulate demand will help the steelmaker, said Mumbai-based Umesh Patel, an analyst at KR Choksey Shares and Securities Pvt. that has a buy equivalent rating for the stock.

Prime Minister Singh’s recent policy steps include opening the retail and aviation industries to more foreign investment, easing caps on capital inflows and speeding up infrastructure projects. Chidambaram’s advisers have said growth will rebound to 6.7 percent next fiscal year from an estimated 5 percent this year. That would still be below the past decade’s average of about 8 percent.

‘Considerable Pain’

“Steel Authority has undergone considerable pain along with other peers in the sector, but most of the bad news has been priced in,” Patel said. “The stock is trading at very attractive valuations and if the government offers a discount, it will be a compelling opportunity for buyers.”

The company is spending 721 billion rupees to expand crude steel capacity by 60 percent to 21.4 million tons, build new iron ore and coal mines and set up new machinery to enhance productivity. Loans will account for half the spending, the company said in a presentation last month.

Construction delays, difficulties in getting mining approvals and resistance from Maoist rebels have hindered the plan. While raw material supplies are just enough to feed Steel Authority’s 13.4 million ton capacity spread over five factory complexes in the country, meeting future requirements of iron ore may pose a challenge, said Giriraj Daga, an analyst with Nirmal Bang Equities Pvt. in Mumbai.

Maoist Rebels

The company’s biggest mill in the central state of Chhattisgarh will run out of iron ore in five years, Chairman C.S. Verma said in August. It hasn’t been able to develop a new mine, fearing “violent reprisals” from Maoists.

It had to shut one of its biggest iron ore mines in the eastern state of Odisha in November after failing to get environmental approvals. The mine resumed work at 60 percent capacity about two months later. Another mine in neighboring Jharkhand has been closed since mid-2011, the people said. Steel Authority gets all of its iron ore from its own mines and imports 70 percent of its coking coal.

“The future will be more subdued for Steel Authority as interest and depreciation costs will offset gains from lower coking coal prices and higher sales volumes,” said Nirmal Bang’s Daga, who has a sell recommendation for the stock. “The company has been dependent on imported coking coal and in a couple of years its iron ore security may also come under risk if approvals don’t come fast.”

Bunker Prices : 07.03.2013

Source : Bunkerworld.com

	IFO380		IFO180		MDO		MGO
Singapore	637.00		644.00		923.00		933.00
Rotterdam	605.50		629.00		-		911.50
Houston	613.50		680.00		1,010.00		1,003.00
Fujairah	639.00		681.50		-		1,017.50
Los Angeles	662.00		709.50		1,050.00		1,060.50
Durban	-		647.50		1,090.00		1,097.50
Tokyo	685.00		693.00		957.50		-
Piraeus	637.00		669.00		-		951.00
Sydney	765.00		804.00		-		1,148.00
Santos	649.50		671.00		-		1,030.00
Guayaquil	678.00		734.00		-		1,494.00
Mundra	670.00		715.00		-		1,100.00
New York	630.50		661.00		1,040.00		1,007.50

Iron ore falls to 1-month low as China steel stockpiles rise

Tue Mar 5, 2013
* Property curbs cloud outlook for China steel demand

* Shanghai rebar rises slightly after Monday's slide
By Manolo Serapio Jr
SINGAPORE, March 5 (Reuters) - Spot iron ore prices fell to one-month lows as buyers from top importer China stepped away from the market, worried about weak steel demand that has pushed up steel stockpiles over the past two-and-a-half months.

China's renewed push to cool its property sector also fuelled doubts on the outlook for steel demand, although Shanghai steel prices regained some ground after Monday's sell-off.

Price offers for iron ore cargoes in China from top suppliers Australia and Brazil fell by $4 per tonne on Tuesday, according to Beijing-based consultancy Umetal.

Benchmark 62-percent grade iron ore .IO62-CNI=SI fell 1.2 percent to $148.80 a tonne on Monday, the lowest since Jan. 29, based on data from Steel Index.

Iron ore hit a 16-month high of $158.90 on Feb. 20, but has lost more than 6 percent as Chinese restocking waned. Buying interest thinned further on Monday after Shanghai steel prices reeled from news that China will strictly impose a 20 percent tax on home sales.

"Sentiment is weak because of the policy signals from the Chinese government, and the current iron ore prices are not really sustainable," said a physical iron ore trader in Hong Kong.

"Given weak demand for steel, many mills are still making huge losses."

Shanghai rebar futures rose slightly on Tuesday after falling nearly 3 percent in the prior session, the steepest decline since October 2011. By the midday break, the most-traded October rebar contract was up half a percent at 3,924 yuan ($630) a tonne.

Still, it was a weak bounce for rebar prices which traders say reflects concern about rising stockpiles of steel products in China, the world's biggest consumer and producer.

Inventories of five major steel products held by traders in China rose for a 10th straight week to 18.8 million tonnes as of Feb. 22, according to data compiled by Bank of America-Merrill Lynch.

Rebar, or reinforcing bar which is used in construction, accounted for about half of the inventory at 9.1 million tonnes, based on the data.

The high stockpiles suggest that the "iron ore demand pipeline feeding the production of more products could be temporarily overstretched," INTL FCStone said in a note, adding it expects iron ore prices to slip to $146-$147 over the course of March.

Iron ore prices are mainly driven by demand from China, which buys about two-thirds of global seaborne iron ore. The government is targeting 7.5 percent growth in gross domestic product for 2013 which should keep the economy on an even keel.

China also aimed for 7.5 percent GDP growth in 2012, when the economy expanded by 7.8 percent, the slowest since 1999.

  Shanghai rebar futures and iron ore indexes at 0407 GMT

  Contract                          Last    Change   Pct Change
  SHFE REBAR OCT3                   3924    +19.00        +0.49
  THE STEEL INDEX 62 PCT INDEX     148.8     -1.80        -1.20
  METAL BULLETIN INDEX            150.67     -1.57        -1.03

  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.2251 Chinese yuan)

(Reporting by Manolo Serapio Jr.; Editing by Richard Pullin)

China Seen Creating Its Own BHP to Boost Purchases Abroad

By Bloomberg News - Mar 5, 2013
A record wave of consolidation in China’s mining industry is creating bigger companies that will have the muscle to compete with the likes of BHP Billiton Ltd. (BHP) for overseas acquisitions.

Even after Chinese domestic mining mergers reached $19.6 billion last year, double the tally for 2011, the government wants to see more. Easier access to capital and less Chinese competition for assets may make companies including China Minmetals Corp. and Aluminum Corp. of China more robust overseas buyers, said Deloitte & Touche LLP.

That’ll help reverse a slump in acquisitions of mining assets outside of China, which fell to a five-year low of $2.9 billion in 2012, data compiled by Bloomberg show. As the world’s biggest importer of iron ore and coal, China relies on foreign sources of the raw materials.

“With stronger and bigger Chinese players emerging, we could see a significant pickup in the volume of overseas acquisitions,” said Richard Tory, Hong Kong-based head of natural resources for the Asia-Pacific region at Morgan Stanley.

China’s mining industry, while one of the world’s largest producers of minerals including gold and tin, is now peppered with thousands of smaller companies.
Minmetals, its largest miner by revenue, had assets of $36.6 billion at the end of 2011 -- dwarfed by BHP’s $122.1 billion, according to data compiled by Bloomberg.

Globally Competitive

“China’s mining sector is too fragmented right now,” said Eugene Qian, head of global banking for China at Citigroup Inc., which advised Cnooc Ltd. on its $15.1 billion acquisition of Nexen Inc., the biggest outbound takeover by a Chinese company. “It needs a lot of consolidation to create majors.”

In January, the government said it would promote mergers in nine industries including steel, aluminum and rare earths to create “globally competitive” enterprises, according to a statement by the Ministry of Industry and Information Technology.

The announcement reinforced what’s already begun. Excluding deals between parent companies and their subsidiaries, the largest domestic acquisition last year was Hunan Jiangnan Red Arrow Co.’s $623 million takeover of Zhongnan Diamond Co.

National Champions

“Creating national champions makes sense because mining is very capital-intensive, said Jeremy South, who oversees global mining advisory at Deloitte & Touche. ‘‘It also makes no sense for Chinese companies to be competing with each other for overseas deals.’’

Shenhua Group Corp Ltd. bought China State Grid Corp.’s electric-generation unit for $8.2 billion last year. The Chinese state-owned miner is now studying an investment in Australia’s Whitehaven Coal Ltd. (WHC), two people with knowledge of the matter said. Whitehaven, part owned by Nathan Tinkler, has a market value of A$2.58 billion ($2.6 billion). The stock is trading at its lowest level since May 2009.

An official at Shenhua Group’s press department in Beijing declined to comment. Whitehaven Chairman Mark Vaile said Feb. 21 that the company hasn’t had any recent dialogue with Shenhua.

Citic Group Corp., China’s largest state-owned investment company, last month agreed to pay about A$452 million for a 13 percent stake in Australia’s Alumina Ltd. (AWC), partner in the world’s biggest alumina business.

Other Chinese miners are also searching for deals. Chinalco Mining Corporation International may seek assets in South America, Africa and Asia, Chief Executive Officer Peng Huaisheng said in Hong Kong on Jan. 17. Parent Aluminum Corp. of China was the most active overseas acquirer among Chinese miners in the past decade with $14 billion of deals, data compiled by Bloomberg show.

Deal Hunters

Minmetals could become one of the main Chinese buyers abroad, according to Deloitte’s South. Both Chinalco and Minmetals are state-controlled.

Zhaojin Mining Industry Co., China’s fourth-biggest gold producer, is studying takeovers in South America and other regions and may announce a deal ‘‘in the near future,” Chen He, assistant to the company’s president, said in November.

Two gold companies that could attract Chinese interest are Saracen Mineral Holdings Ltd. (SAR) of Perth and Englewood, Colorado- based Alacer Gold Corp. (AQG), which has assets in Australia and Turkey, according to Troy Irvin, a Perth-based analyst at Argonaut Securities Pty. Their large reserves and production assets typically appeal to Chinese companies, Irvin said. Officials at Saracen and Alacer declined to comment or weren’t immediately available.

“The Chinese see the value of building bigger companies to compete with major mining companies in the world,” said Deloitte’s South.

Birla Mulls U.S. Purchase Driven by Shale Gas: Corporate India

By Rakteem Katakey & Abhishek Shanker - Mar 5, 2013
Bloomberg
Indian billionaire Kumar Mangalam Birla is considering buying his first fertilizer plant in the U.S. to benefit from a 55 percent drop in prices of natural gas used to fuel the factories.

His Aditya Birla Group (ABNL) is seeking a “mid-size acquisition” which has access to technology that can be used in the conglomerate’s operations, Birla said in an interview. The U.S. boom from hydraulic fracturing, or fracking, which uses pressurized water to drive gas and oil from shale rock has depressed energy prices, while an intelligence advisory panel said in December that the world’s biggest economy may achieve energy independence in as little as 10 years.

“There’s going to be a huge geopolitical shift with shale gas in America,” Birla told Bloomberg TV India. “This is an interesting opportunity, given the fact that we have a large exposure to manufacturing. I see companies in chemicals and fertilizer space or companies that give technology for the group’s business.”

Birla, 45, who controls India’s biggest cement producer Ultratech Ltd. (UTCEM) and the world’s largest rolled aluminum maker Novelis Inc., is joining other Indian companies including Welspun Corp., which is close to starting a $100 million pipe factory in the U.S. targeting shale gas clients. The American Chemistry Council estimates low-cost natural gas may generate $72 billion in capital investment as petrochemical companies relocate or boost spending in the U.S.

Revenue Goal

The Aditya Birla Group is targeting a 63 percent increase in revenue to $65 billion by 2016, and is also looking for acquisitions in Brazil, Thailand and Indonesia, Birla said. Half of the group’s current $40 billion turnover comes from overseas, he said.

A slump in local gas production is forcing Indian companies, including power stations and fertilizer makers, to import the fuel, which is more expensive. The government also controls prices of fertilizers, making use of costly fuel unviable.

“Energy cost would be about 60 percent of the total cost and it makes an obvious choice to have a U.S. presence,” said P.D. Samudra, executive director at Uhde India Pvt., a unit of ThyssenKrupp Uhde GmbH that undertakes projects for industries including fertilizers, petrochemicals and polymers. “In India, we also have subsidy issues.”

Shares of Aditya Birla Nuvo Ltd., a group company that produces fertilizer, rose as much as 1.1 percent to 1,057.95 rupees and traded at 1,056 rupees as of 9:42 a.m. in Mumbai. The stock has gained 21 percent in the past year, compared with a 9.5 percent rise in the benchmark Sensitive Index.

No Addition

India hasn’t added any urea manufacturing capacity since 1999, according to the fertilizer ministry’s annual report.

Aditya Birla Nuvo can produce 1.1 million metric tons annually at Jagdishpur in the state of Uttar Pradesh. The company’s fertilizer business earns about 20 billion rupees ($364 million) in revenue from sales in the eastern states of Bihar, Jharkhand and West Bengal, according to a corporate presentation on its website.

Natural gas production at Asia’s second-biggest energy consumer declined 14 percent to 34.6 billion cubic meters in the 10 months ended Jan. 31, according to data compiled by Bloomberg. Output has declined every month compared with a year earlier since November 2010, as the nation’s biggest field operated by Reliance Industries Ltd. slumps.

In the U.S., a surge in gas production from shale rocks from Texas to West Virginia made it the world’s biggest producer of the fuel in 2009, beating Russia. Gas futures reached a decade low of $1.91 per million British thermal units in April in New York trading. They’ve slid 55 percent since Jan. 1, 2008.

Expanding Abroad

“Lower energy costs will attract companies to the U.S. and the Aditya Birla group will look to take advantage of cheaper gas,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. at Kochi in southern India. “There’s a dearth of gas in India and imported gas is expensive.”

Gas in New York trading may reach $3.95 per million British thermal units by the end of this year, according to the median of 20 analyst estimates compiled by Bloomberg. Prices were at $3.55 per million Btu as of 12:12 p.m. in Singapore.

Birla has spent more than $1.5 billion in acquiring assets overseas in the past two years. Since January 2011, the group bought four companies in the chemical industry, including three overseas.

It agreed to buy Columbian Chemicals Co., a Georgia, U.S.- based carbon black maker, for $875 million on Jan. 31, 2011. Three months later, it bought Sweden’s Domsjo Fabriker AB for $340 million and followed it up in July with the purchase of Terrace Bay Pulp Inc., a paper pulp mill in Canada, to secure raw material supplies for its viscose staple fiber business.

Country Risk

Birla would rather invest in countries including Brazil and Indonesia than back home as frequent policy changes in India discourage companies from spending in Asia’s third-biggest economy, he said in the interview.

India slipped three levels in the 2013 World Economic Forum’s Global Competitiveness Index from a year earlier, to 59. Brazil was ranked 48, while Indonesia was in the 50th position.

“Country risk for India just now is pretty elevated and chances are that for deployment of capital, you would look to see if there is an asset overseas rather than in India,” Birla said. “We are in 36 countries around the world. We haven’t seen such uncertainty and lack of transparency in policy anywhere.”

A report on Feb. 28 showed India’s $1.8 trillion economy rose 4.5 percent in the three months to Dec. 31 from a year earlier, lower than forecast and the weakest pace in almost four years, as cooling investment, a drop in exports and government spending cuts sapped growth.

Net Worth

Birla has a net worth of $8.7 billion, according to the Bloomberg Billionaires Index. His wealth has declined 4.5 percent this year.

Birla’s plans to invest in the U.S. follows announcements by Austrian steelmaker Voestalpine AG to Singapore-based Indorama Group, which are hoping to benefit from cheap gas. Nucor Corp. (NUE), the biggest U.S. steelmaker, plans to start up a $750 million Louisiana project in mid-2013. This is among at least five U.S. plants under consideration or being built that would use gas instead of coal.

Indorama Group, a polyester maker operating in more than 20 nations, plans to spend $4 billion on chemical plants in gas- producing countries, including the U.S.

“A lot of manufacturing will come back into North America,” Birla said. The U.S. looks very attractive from a manufacturing point of view, he said.

ADM says unwittingly used sanctioned Iran ship in grain trade

Mon Mar 4, 2013
By Jonathan Saul
(Reuters) - Archer Daniels Midland Co said it unwittingly used a vessel controlled by a sanctioned Iranian shipping firm last year to transport grain in what was an effort by Tehran to hide the ship's ownership.

The Islamic Republic of Iran Shipping Lines (IRISL) has faced Western and U.N. sanctions for years, based on accusations of transporting weapons, a charge it denies.

Illinois-based ADM, one of the world's largest grain traders, said in a U.S. regulatory filing that a majority-owned and controlled affiliate of the company hired a vessel to transport a cargo of grain in July last year.

ADM officials said on Monday they had no further comment on the issue beyond what was disclosed in the Securities and Exchange Commission (SEC) filing dated Feb. 28. IRISL could not be immediately reached for a comment.

ADM said the name of the vessel and the charterer were not on the U.S. Treasury's list of targeted individuals or entities when it made shipping arrangements and paid $481,800 directly to the charterer.

"It was later determined by the company and its bank that the vessel involved was beneficially owned by IRISL, a sanctioned party," ADM said in the filing.

"The involvement of a sanctioned party was inadvertent and unintentional and we believe the result of a concerted effort by Iran to hide its ownership of the vessel," it said.

ADM said in the filing that an 80 percent owned and controlled affiliate hired the vessel.

IRISL, Iran's biggest cargo carrier, has tried to dodge sanctions by changing its flags and setting up front companies, the U.S. Treasury and the European Union have said. Last year IRISL Managing Director Mohammad Hussein Dajmar said if pressure from Western sanctions continued, the group would face increasingly grave financial problems.

ADM said in the filing it had made a voluntary disclosure to the U.S. Treasury's Office of Foreign Assets Control (OFAC) unit, which enforces trade sanctions.

"Neither the company nor its affiliate nor other of its subsidiaries have any intention of continuing such activity with a prohibited party," the U.S. agribusiness giant said.

"There was no profit that can be attributed to this specific transportation activity."

A Treasury spokesman said he could not comment on the ADM case. However, a voluntary self-disclosure is one factor OFAC takes into account when determining the appropriate enforcement response in the case of apparent sanctions violations, he said.

WARNING LETTER

If ADM can show it had due diligence in place because the underlying transaction was licensed, and that it was a one-time issue, the company would probably get a warning letter, a former U.S. Treasury official with knowledge of Iran sanctions said.

"There will be probably a six month to a year period when they are under investigation and they have to provide documents and OFAC will probably issue them a warning letter in which case we will never see it, as they are never made public," the former official said.

ADM did not disclose the name of the vessel or the charterer in the filing and it was unclear if the grain was bound for Iran or another destination.

Earlier this year, the Amina, an Iranian-flagged vessel, fled detention in Sri Lanka's waters and returned to Iran. Sri Lanka's navy had fired warning shots to prevent the vessel from leaving, acting on a court order obtained by Germany's DVB Bank in pursuit of debts it said were unpaid.

The Amina is managed by Tehran-based Rahbaran Omid Darya Ship Management, which authorities in Brussels and Washington have said is an IRISL front company.

Evening markets: wheat sunk by rains while exports boost soy

4th Mar 2013, by Agrimoney
Grain futures started the day ahead of soybeans.

But Monday sure didn't end that way.

If early deals belonged to concerns about the Chinese economy - which hung around long enough in share markets to see stocks close lower in European markets, after a 3.7% tumble in Shanghai – late deals in Chicago reflected a whole different series of dynamics.

The most notable of these was the hope for more of the rain and snow fall which has already appeared to be US helping winter wheat seedlings recover from a dismal, drought-hit start to their growing season.

From deficit to surplus?

"Snow is expected to build across the north western, central, and eastern Midwest over the next few days, which will further improve soil moisture there," weather service MDA said.

"This will benefit winter wheat this spring, and will also benefit early corn and soybean germination once planting begins."

At Martell Crop Projections, Gail Martell said: "The weather pattern has suddenly reversed course late in winter generating frequent storms and heavy precipitation in the central US.

She noted forecasts for "two new storms this week, the first one targeting the Upper Midwest and Great Lakes and the second, the central Great Plains", where US winter wheat seedlings have been in particularly poor health. 

But for how long?

Ms Martell said: "Drought is rapidly resolving in the US bread-basket. The next storm, if it develops as expected, may even generate a moisture surplus."

Tender defeat?

Furthermore, there was disappointment that the US did not appear to have featured, heavily at least, on the roster of the winning 575,000 tonnes of wheat import orders placed by Saudi Arabia at the weekend, following tender.

"It didn't look like there was any US stuff in there," Jerry Gidel, chief feed grain analyst at Chicago broker Rice Dairy, said.

There was some slightly supportive news on the wheat export front, with US shipments, as measured by cargo inspections, reaching 24.0m bushels last week, up 2.8m bushels week on week, and 6.6m bushels year on year.

And Lebanon was the latest to enter a wheat tender, for 50,000 tonnes, keeping up the idea of healthy import demand in the market as a whole.

'Give growers hope'

However, the prospect of US rain proved decisive.

"The forecast will give growers hope wetter soil conditions will benefit the winter wheat crop that is about to spring from dormancy," traders at a major European commodities house said.

"The above has fuelled more non-commercial selling as traders bet against the wheat price recovering from an eight-month low posted last week.

"Currently the funds have a large short position in Chicago wheat, in other words they are betting that the prices will continue to drop."

Prices drop

While some speculators in fact closed short positions in the week to February 26, regulatory data showed, this may only have created a vacuum for others to fill.

Chicago wheat for May closed down 2.5% at $7.02 ½ a bushel, an eight-month closing low, with the March contract ending down 2.4% at $6.96 a bushel, ditto.

The US performance dragged European contracts lower too, with Paris wheat for March ending down 1.1% at E247.25 a tonne (but not at an eight-month low) and the better-traded May lot down 2.1% at E234.75 a tonne.

London wheat for May ended 1.3% down at £204.25 a tonne.

Export support

Wheat's sell-off dragged on fellow grain corn too, which had posted gains earlier on, after the US Department of Agriculture unveiled the sale of 120,000 tonnes of US old crop to "unknown" destination, believed likely to be China.

"The market then sold off sharply as a $0.20-a-bushel lower wheat market is not conducive to strength in the corn market," Darrell Holaday at Country Futures said.

The US export inspection news was OK for corn too, at 15.7m bushes, up 4m bushels week on week, if half year-ago levels.

And, signally, farmers remain reluctant sellers, supporting cash prices.

"When talking to farmers at recent meetings it would appear it will take near $8.00-a-bushel cash to have them open the bin doors again," Paul Georgy at broker Allendale said.

Spreads widen

Furthermore, "the natural seller, the producer, will be mostly out of the market in March, April, May," when spring sowings will be attracting farmers' attention, US Commodities said.

"The market will be forced to rely on hedge inventory from the commercial."

While corn fell, its decline was signally less than that of wheat, with Chicago's March contract closing down 0.2% at $7.23 a bushel – a premium of more than $0.20 a bushel to its wheat peer.

The March corn lot gained on May corn too, which ended down 0.7% at $7.03 ¼ a bushel.

That said, that still left Chicago's May corn contract as well at a premium to its wheat peer.

US to import soybeans?

However, for bona fide gains, it was necessary to turn to soybeans, which closed up 1.7% at $14.90 ¼ a bushel for March delivery, and 1.4% at $14.62 a bushel for the better-traded May lot.

"Export business is still providing the strength in the soybean complex," Country Futures' Darrell Holaday said.

In fact, the US announced cargo inspections of a bumper 40.3m bushels of soybeans last week, up 12.5m bushels week on week - and higher indeed than a year before, when the US had more to spare.

"We are shipping that many soybeans out, it looks like come May we will have to turn to South America to buy some back again," Rice Dairy's Jerry Gidel said.

"The prospect of importing has been heightened dramatically."

History repeating?

Soft commodities enjoyed a mixed day too, with cocoa falling to a 10-month low in London, where the May contract ended down 1.3% at £1,388 a tonne, and an eight-month low in New York, where May supplies closed 1.2% down at $2,056 a tonne.

"Widespread rains have arrived in West Africa, providing welcome relief to cocoa producers who were getting concerned that the Harmattan season was leading to too dry conditions for the developing mid crops," Macquarie said.

"This is likely adding to the bearish near-term sentiment."

Commerzbank said that, while the International Cocoa Organization last week forecast a world cocoa deficit of 45,000 tonnes in 2012-13, "memories of the previous year are likely to be awakened.

"At the time, the first estimate for 2011-12 assumed a market deficit of 71,000 tonnes, only for an 86,000-tonne surplus to be achieved at the end of the day."

Bouncing beans

However, New York arabica coffee futures for May soared 2.3% to 146.65 cents a pound.

The gain was attributed to jitters over speculators' high level of short positions in the bean, at a time when there are nerves over losses in Central America to roya fungus, which could hit the headlines again this week given the ongoing meeting of the International Coffee Organization.

New York cotton for May added 1.0% to 86.26 cents a pound, helped by the International Cotton Advisory Committee standing by a forecast of a decline in world stocks in 2013-14, contrasting with USDA ideas of a further increase.