Price fall wins US wheat victory at Egypt tender

12th Jan 2014, by Agrimoney
The tumble in prices won the US wheat its first victory of the season at the benchmark tenders tun by Egypt's Gasc authority, despite the extra cost of shipping to the North African country across the Atlantic.

Gasc followed up its huge 535,000-tonne purchase of European Union and former Soviet Union wheat on January 3 by buying 55,000 tonnes of US soft red winter wheat, offered by Ameropa.

The purchase was the first of US by the grain authority at tender since February last year, although Egyptian buyers, the world's top wheat-importers, had bought 220,000 tonnes through other channels ahead of the tender.

The victory appears testament to the extent to the improvement in the competitiveness of US wheat thanks to its plunge since the end of November, a period during which it has lost 12.4% on Chicago's futures market.

'Far more attractive'

"US wheat has made itself far more attractive over the past few weeks," a UK grain trader told Agrimoney.com.

"Europe has continued to pick up orders, but it can no longer take that for granted, even with its usual buyers."

The US win comes despite a significant freight disadvantage to shipping to Egypt across the Atlantic, rather than just through the Mediterranean and Black seas.

Gasc is believed to be paying $38 a tonne freight for the Ameropa wheat, compared with prices of $16-17 a tonne for shipping from the Black Sea.

The winning US soft red winter wheat offer was, at $265 a tonne excluding freight, considerably cheaper than, for instance, the move competitive Russian grain, priced by Cargill at $293.25 a tonne.

The cheapest French wheat was offered by Louis Dreyfus, priced at $284.84 a tonne excluding freight.

'Record low wheat feeding'

US wheat prices have been hurt by a signs of a slowdown in export sales, by increasing ideas of the world's 2013-14 harvest, which the USDA on Friday upgraded by 840,000 tonnes to a record 712.7m tonnes, and by a switch by consumers to corn.

This dynamic was highlighted by data on Friday which showed US wheat stocks as of December 1 far larger than had been thought, reflecting that "wheat feeding was a record low" for the October 1-December 1 quarter, according to broker CHS Hedging.

Meanwhile, corn stocks were pegged below traders' expectations, implying feed use for the period "at just over 2.4bn bushels, a record for the quarter", CHS said.

In fact, according to CHS Hedging, the figure implies that "wheat feeding was a record low during the second quarter of the marketing year.

GRAINS-U.S. corn climbs to near 3-week high, wheat rebounds

Mon Jan 13, 2014
* Corn up for 2nd day

* USDA cuts global corn supply estimates

* Wheat rebounds from lowest since July, 2010

* Egypt buys 55,000 T U.S. soft red winter wheat
By Naveen Thukral
SINGAPORE, Jan 13 (Reuters) - U.S. corn jumped to its highest since late December on Monday, adding to last session's biggest one-day gain in eight months as a surprise reduction in
global supplies underpinned the market.

Wheat rose almost 1 percent after declining to a three-and-half year low on Friday, supported by Egyptian demand, while soybeans edged lower, snapping two consecutive sessions of
gains.

Chicago Board of Trade March corn was up 0.4 percent to $4.34-1/2 a bushel by 0339 GMT, just below the session peak of $4.35-1/2 a bushel, the highest since Dec. 24. Corn gained
more than 5 percent on Friday in its biggest one-day gain since April last year.

March soybeans fell 0.2 percent to $12.75-3/4 a bushel.

"Corn was under so much pressure before the report that it resulted in a large short-position in the market, but the USDA has surprised everyone," said Vanessa Tan, investment analyst at
Phillip Futures in Singapore.

The U.S. Department of Agriculture pegged 2013/14 U.S. corn production at a record 13.925 billion bushels, below its last estimate, in November, of 13.989 billion.

Analysts had expected the USDA to raise the estimate to 14.066 billion due to favourable conditions at harvest time in the fall.

Corn yields of 158.8 bushels per acre were down from the 160.4 estimated in November and also lower than the trade forecast.

Worldwide, the USDA projected global 2013/14 corn ending stocks at 60.23 million tonnes, down from its December estimate of 162.46 million. Analysts had predicted the USDA would raise
its outlook to 163.2 million.

Soybean production was seen at a record high of 3.289 billion bushels, up 1 percent from November but close to the average guess of 3.279 billion.

The wheat market received some support from bargain-hunting and Egypt's purchase of U.S. wheat. March wheat rose 0.9 percent to $5.74 a bushel.

Egypt, the world's biggest importer of wheat, bought 55,000 tonnes of soft red winter wheat from the United States for shipment in Feb 11-20.

The USDA pegged U.S. wheat stocks for the 2013/14 season at 608 million bushels, above market expectations.

  Prices at  0339 GMT
  Contract        Last    Change  Pct chg  Two-day chg MA 30   RSI
  CBOT wheat     574.00     5.00  +0.88%    -2.51%     623.08   22
  CBOT corn      434.50     1.75  +0.40%    +4.20%     428.32   62
  CBOT soy      1275.75    -2.75  -0.22%    +0.51%    1305.69   46
  CBOT rice      $15.64    $0.00  -0.03%    +0.61%     $15.47   45
  WTI crude      $92.45   -$0.27  -0.29%    -0.29%     $96.47   31
  Currencies                                               
  Euro/dlr       $1.367   $0.007  +0.50%    +0.74%
  USD/AUD         0.903    0.013  +1.47%    +1.40%
  Most active contracts
  Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight
  RSI 14, exponential

Indonesia implements ban on unprocessed ore export

The Associated Press, Jakarta, Indonesia | Business | Sun, January 12 2014
An Indonesian law banning the export of unprocessed minerals took effect Sunday, with the government aiming to boost local operations and create more jobs and mining companies warning of losses and layoffs.

Coordinating Economic Minister Hatta Rajasa said that Indonesian President Susilo Bambang Yudhoyono signed the decree after a meeting of Cabinet members late Saturday. It followed days of intense negotiations involving government officials, entrepreneurs and experts to explore ways to minimize the impact of the ban.

Ministry of Finance ordered customs officials in seaports across the country to supervise all export activities to make sure no ores are shipped out beginning Sunday.

Rajasa did not mention any exemptions, but said the decision took into account concerns about preventing mass layoffs, promoting regional economic development and enabling local mining companies to continue operating. He added that a number of regulations will be issued by ministries regarding the implementation.

The ban is mandated by the Mining Law passed by Parliament in 2009, which included a provision that mineral ores must be processed at smelters in Indonesia starting Jan. 12, 2014.

Mining companies, including PT Freeport Indonesia and PT Newmont Nusa Tenggara, have warned that they will have to lay off thousands of workers if the law was imposed without exemptions.

"If the ban on export is imposed on Jan. 12, Freeport will only be able to process 40 percent of its production," said Daisy Primayanti, a spokeswoman for Freeport Indonesia, which operates a giant U.S.-owned mine in Indonesia's Papua Province. "One of the impacts is a reduction in the number of employees."

Minister of Mines and Energy Jero Wacik said that government departments will soon issue regulations detailing provisions of the ban, including export tax rates and the minimum level of concentrate allowed for exports.

The ministry has proposed a three-year exemption that would allow companies to export unprocessed minerals until 2017 provided they make a commitment to build their smelters in Indonesia. It was intended to protect hundreds of small mining companies from going out of business.

Minister of Industry M.S. Hidayat said that companies are still allowed to export concentrates of certain purification level until 2017, but they have to pay an export tax.

"We will impose the progressive export tax, which means the higher the purification level, the lower export tax," Hidayat said.

Marius Toime, a partner at the international law firm Berwin Leighton Paisner, said that the law might cause other problems because it would reduce revenues from export taxes, which in turn may result in a widening current account deficit for the government.

"This deficit, combined with the legal uncertainty around the ban's ramifications, has already undermined investor confidence," Toime said. He added that it is not economically feasible for small Indonesian mining companies to develop refining capacity.

The government has estimated that the ban will cut government revenue by about 10 trillion rupiah ($833 million) this year due to declines in export taxes and royalties.

Small Miners Squeezed in Ore Export Ban

By Muhamad Al Azhari, Tito Summa Siahaan & Novy
Lumanau on 8:52 am January 13, 2014.
Small miners are likely to feel the brunt of the nation’s ban on the export of mineral ore, which could leave more than 2 million people out of work, and executives expressed disappointment that implementation of the mining law serves as more of politicking than common sense.

Few details are known about the ban, which went into effect on Sunday morning, following a cabinet meeting that lasted into Saturday night at President Susilo Bambang Yudhoyono’s private residence in Puri Cikeas, Bogor, West Java.

“It is very disappointing. On an issue that affects many people’s interest, the government cannot provide clarity. I cannot interpret what’s the underlying message from the statement of some cabinet ministers,” said Agus Suhartono, the deputy chairman of the Indonesian Mineral Entrepreneurs Association (Apemindo).

“What came out was more uncertainty. How come the business sector is treated like it is part of the political theater?” said Agus, who is also chief operating officer of Singapore-based Ibris Nickel, the third-largest nickel miner in Indonesia.

The company has halted operations since Dec. 31 due to concerns about the export ban.

Ibris — which is controlled by Indonesian businessman Amirsyah Risjad — produces around 2 million metric tons of nickel ore per year and employs about 1,400 workers at its mining site in North Konawe, Southeast Sulawesi. Shipments of its nickel ore were no longer allowed as of Sunday.

Apemindo — which has around 680 registered members — estimates that almost 30,000 mine workers have been laid off as mining companies cut back on operations on concern of the ban.

The National Solidarity of Mine Workers (Spartan) estimated a bigger number of layoffs. Spartan calculates at least 2.878 million workers being laid off if the government insists in implementing the ban, said Juan Forti Silalahi, in a press release sent to the media in Jakarta on Saturday.

Limited details

On Saturday, journalists were only provided with statements from some members of the cabinet as the president signed the government regulation (PP) that enforced the Mining Law 2009, which stipulated that mining companies with no smelting capacity will not be allowed to ship unprocessed minerals abroad.

“During the discussion in the making of the PP, we also consider about the workforce [in the sector]. We don’t want to allow massive layoffs after we have created jobs with hard work,” Energy and Mineral Resources Minister Jero Wacik said on Saturday after the regulation was signed.

He said additional ministerial regulations would follow, namely from the energy, finance and trade ministries.

Agus of Apemindo said there were difficulties in getting details about the PP.

“Why does the government hide the most-awaited details? Don’t they have the details? Are they afraid of their own people? I can’t understand the logic,” he said.

Apemindo and a bauxite producer association sent a statement to the media on Sunday, saying that they want the same treatment provided by the government to copper miners.

Such treatment would give a reprieve to 66 companies, including Freeport Indonesia, which is a unit of Freeport-McMoRan Copper & Gold, and Newmont Nusa Tenggara, a subsidiary of Newmont Mining.

Freeport Indonesia and NNT together make up 97 percent of Indonesia’s copper production.

Both companies’ level of concentrate is 20 percent to 30 percent of copper ore, and they send some of their production for refinement to Smelting, which currently is the only copper smelter in Indonesia.

Setting purified levels

Didie Suwondho, the head of Kadin’s special taskforce for mineral processing, hoped that upcoming details will not change from what had been agreed between the government and the business community last week.

What had been agreed upon is that iron ore (sand) needs 58 percent of purification, copper 15 percent, zinc 52 percent, lead 57 percent, he said.

Indonesia Gold and Copper Association chief Natsir Mansyur said last week that the government agreed the minimum purification of nickel matte would be 70 percent, ferronickel 10 percent, and nickel pig iron 4 percent.

The reprieve to the 66 companies might also suggest the mining industry is being consolidated, as construction of smelters could take years and effectively push smaller miners out of business.

There are thousands of miners operating in Indonesia, according to R. Sukhyar, the newly appointed director general of coal and mineral resources at the Energy Ministry. He didn’t give an exact number.

The government, led by Sukhyar, has been in discussions with the Indonesian Chambers of Commerce and Industry (Kadin) and related mining associations, including Apemindo and the Indonesia Mining Association (IMA), about the level of purity requirement.

Apemindo and the bauxite group requested the government to ease the requirement on smelting bauxite into alumina. They said that in the last meeting, the government wanted miners to purify bauxite into 99 percent smelter grade alumina and 90 percent chemical grade alumina. Smelter grade alumina is used for the smelting of aluminum metal and chemical grade alumina is widely used in the production of electronic materials such as integrated circuit packaging and for LCD glass.

The two groups said investment for a smelter could be more than $1 billion, with annual capacity at up to two million tons of alumina.

With such large investment, companies need to be allowed to export the ore to help finance the construction of the expensive smelter, they said in the statement said. Additionally, they say that most bauxite shipped overseas is neither classified as raw mineral or ore, because the aluminium oxide level is at more than 45 percent.

“Entrepreneurs in the bauxite sector request equal treatment to be allowed to be treated like the copper producers. In the previous discussion, the government gives flexibility for a copper miner by allowing miners to export copper at the minimum processing level of copper concentrates at 15 percent,” the two groups said.

While some of the biggest nickel miners, including Vale Indonesia, which specializes in nickel matte, and Aneka Tambang, which specializes in ferronickel, have smelters, many other nickel miners are sending raw material overseas.

Nickel miner Mobi Jaya Persada, which ships nickel ore that is used in stainless steel production, for example, is preparing for the worst, according to Reuters.

“We’ve already started reducing the workforce and we’re going to continue if the regulation stops ore exports,” said Roy Kojongan, business development manager for Mobi Jaya Persada.

He was quoted by Reuters as saying on Sunday that the company had already laid off half of its 100 employees and only had 44 employees left.

The Golkar Party has been ready to attack the government’s inconsistency on the mineral ore export ban.

Bobby Adhityo Rizaldi, a member of House Commission VII that oversees energy and mineral resource affairs, said last week that the government must be consistent in implementing the law and not need to worry about the threat of possible layoffs. “No excuses,” he said.

— Additional reporting from Reuters