Mozambique's lack of infrastructure may hurt investments by Indian firms like Coal India, JSW Steel

29 JAN, 2013, MEERA MOHANTY, ET BUREAU
NEW DELHI: Infrastructure challenges of Mozambique, the south-east African nation that led to a $3-billion 'writedown' and a change of CEO for mining giant Rio, is likely to haunt Indian investments by companies such as Jindal Steel and Power, Coal India, JSW Steel in the resources-rich country.

Undaunted by Mozambique's lack of infrastructure, Indian firms had followed Vale and Rio Tinto to the mineral-rich African nation that was touted as the new low-cost rival to Australia for coking and thermal coal-hungry companies.

Among Indian firms, JSW has admitted to early disappointment in the exploration of an initial deposit that reportedly turned out to be burnt coal.

"It is not encouraging. We are lucky that we did not spend much. All the good assets were taken by Vale and BHP. They had the early mover advantage. The other companies including Indian companies went in later," explained a senior official at JSW Steel. For a few Indian firms who have made significant progress, there are hurdles awaiting them.

For Indian firms, the option now could be an expensive alternative rail system that Coal India is mulling.

"We are looking to develop our own rail system, and will be open to talking to other partners to come on board. We are considering appointing a project consultant soon," said a Coal India official, asking not to be named. In addition, the Essar Group has proposed to develop a 3,000-crore bulk handling port facility next to the Beira port. The idea reportedly is to connect its Zimbabwe investment to the Indian Ocean.

The existing Sena Railway Line, from Tete to Beira port, is already proving insufficient for Vale and Rio's traffic.

Rising coal imports boosts viability of a new Indian shipping venture

By: Ajoy K Das
29th January 2013
KOLKATA (Mining Weekly) - Indian major Coal India Limited (CIL) and Shipping Corporation of India Limited (SCI) were expected to revive the a joint venture (JV) shipping company mooted nearly three years ago, as coal imports were poised to gain momentum.

CIL and SCI concluded an agreement for an equal JV shipping company in 2010, but the venture stalled at the time owing to issues around imported coal, an official in CIL said.

However, the current mounting shortage of coal from domestic sources has made imported coal a long-term reality. Issues involving fuel supply agreements (FSAs) between coal supplier and users were also cropping up, along with the option of direct imports by end-users.

Furthermore,  CIL’s own import ambitions were also taking shape, necessitating plans for a total supply and logistics solution, which the company said made a shipping venture more viable.

The shipping venture has received a viability boost by CIL’s aim of starting imports by March 2013, in order to meet the miner’s contracted obligations under the already established FSAs with thermal power generating companies, and more FSAs scheduled over the next few months.

As per the Indian government directive under the FSAs, the coal miner would be obligated to supply a minimum of 80% of the contracted volumes from domestic mines and would have to resort to imports to meet the balance demand. Indications were that CIL would have to immediately start importing between six-million and seven-million tons of coal to meet the expected shortfalls under FSAs already in place.

Another development favoring the shipping JV has been the recent directive from the Indian government to all government-owned heavy manufacturing companies to use Indian shipping lines for their international trading activities.

Companies like CIL, Steel Authority of India Limited (SAIL), and the country’s largest domestic power producer NTPC Limited, would henceforth have to give preference to Indian flag carriers for inward and outward shipment of tonnages.

Officials said that at the time of mooting the proposal in 2010, both SCI and CIL were keen to include NTPC as a third partner, since the power producer would be among the largest importer of coal for its thermal power plants.

However, in the wake of a new coal import regime emerging and possible changed sourcing plans of the power producer, fresh negotiations would have to be initiated with NTPC for its association in the shipping venture, the officials added.

NTPC’s total coal imports during 12-month period ending March this year was projected at 16-million tons, while total coal imports was forecast to exceed 100-million tons during the same period.

Edited by: Esmarie Swanepoel

Evening markets: fund nerves lift sugar. SA fears raise corn

28th Jan 2013, by Agrimoney
There is, ironically, nothing like a huge net short position in crop futures to get buyers on board.

Managed money, a proxy for speculators hiked their short positions in New York raw sugar futures in the week to last Tuesday by more than 43,000 contracts.

The move turned a net long position of 12,162 the week before into a net short holding [meaning short bets, which profit when values fall outnumber long positions, which benefit when prices rise] of 18,302 lots, the most since at least 2006.

And the question then is whether speculators have fulfilled their appetite for short positions, and where the next sellers are coming from.

Ethanol to  boost share?

Especially when there are some reasons not to be so downbeat.

"The expectation of a record-high sugar cane crop in Brazil, due to commence in April, is weighing on prices," Commerzbank said.

"Nonetheless, it is increasingly anticipated that a growing proportion will be converted into ethanol for reasons of profitability," the bank said, noting a forecast that a 9% higher cane crop in Brazil's key Centre South region would raise ethanol output by 24%, but sugar only 4% to 35.5m tonnes.

With sugar technically "oversold", New York's March contract rose 1.9% to 18.73 cents a pound as speculators booked profits on their short holdings.

Cocoa eases

However, in cocoa, for instance, another soft commodity in which ideas of looser supplies than previously expected are undermining prices, speculators still have plenty of room to raise their short holdings without ringing alarm bells.

Speculators cut their net long holding by more than 4,000 lots in the latest week, but it still remained, at 18,642 contracts, relatively high, and in contrast to the net short position managed money had in New York cocoa a year ago.

With expectations of West African selling in the wings, New York cocoa for March eased 0.6% to $2,161 a tonne, the lowest since June last year, if gaining 0.4% to £1,432 a tonne in London.

In New York arabica coffee, meanwhile, in which speculators have a reasonable net short position of 11,206 lots, added 0.5% to 149.00 cents a pound, amid lingering concerns over the impact of disease pressures on central American crops.

Moisture in Argentina?

For grains and oilseeds, meanwhile, although speculators' net short in Chicago wheat has raised some eyebrows, given the poor condition of the US winter wheat crop, it was South American weather which continued to dominate trading, and send prices on a topsy-turvy path.

"The overnight trade began higher and stayed firmer most of the night until the morning forecast added moisture to southern Brazil and Argentina," US Commodities said.

That was price negative, given the support which dryness fears have given to prices.

'Not a lot a rain'

Not so fast. Was the forecast right?

"The GFS weather model continues to point to another round of precipitation this week that is much heavier. But the EU model is not in agreement," Darrell Holaday at Country Futures said.

"This is the same problem we had with the models last summer in the middle part of the US last summer.

"As a whole the GFS model continues to point to more moisture that actually falls as it looks out in the future. "

Weather service WxRisk.com added: "The European model has some rain over central and northern Argentina and south eastern Brazil" in its outlook, "but nothing like the GFS is showing.

While rains are to reach 70% of areas, "the European model has no rain fall these areas over the five day   period   greater than one inch.  Over a five day interval that is simply not a lot a rain."

'The real concern'

Gail Martell, at Martell Crop Projections, said that "hot temperatures in the mid-90s Fahrenheit are predicted this week in Argentina's grain belt.  

"Intense heat is capping off a month of sub-par rainfall and reduced humidity.

"Shallow-rooted corn," which fell short on the rooting front after being planted into water-laden soils, "and soybeans would be most vulnerable to moisture stress".

Mr Holaday said that, from all this, "the concern really should be the Argentina corn crop.

"Rainfall in almost all of Argentina in the last two weeks has been below 50% of normal and temperatures are going above 100 degrees this week.

"This is when the corn is in or moving into a critical development stage."

'Rapid enough to support prices'

The impact of all this, coupled with weekly US export data, as measured by cargo inspections, of 21.1m bushels was to send corn higher.

The respectable export figure, twice that of a week before, countered ideas that soft ethanol production and an unexpected drop in feedlots' animal intake last month meant corn rationing was happening in earnest.

"The pace of current and expected corn consumption appears to be rapid enough to provide support for old crop prices for several more weeks," Darrel Good at the University of Illinois said.

He added that the dynamics do "not suggest the need for much higher prices", without a South American weather scare.

'US wheat competitive'

Still, with the lingering Argentina concerns, Chicago corn for March added 1.2% to $7.29 ¼ a bushel.

And that helped fellow grain wheat too, which closed up 0.4% at $7.79 ¼ a bushel for March.

After all, on export markets, "US soft red winter wheat is now competitive out of the US Gulf," US Commodities said.

"US wheat is $24 a tonne under French wheat and $20 a tonne under Australian wheat," while "Russian wheat continues to push to new highs" amid talk that it will indeed ditch a 5% import duty on grain.

And US wheat exports remained relatively high, at 22.3m bushels, not far below the previous week's. and well above the year-ago figure of 18.8m bushels.

'Locking in positive crush margins'

Soybean exports were not quite so upbeat, coming in at 40.7m bushels, down more than 8m bushels week on week., and a little below the year ago figure.

But import fears were assuaged by a separate USDA announcement that China had bought 220,000 tonnes of US wheat, for 2013-14 delivery.

"This brings their new crop total up to 1.9m tonnes. Processors enjoying locking in positive crush margins," Mr Holaday said.

Soybeans for March ended up 0.5% at $14.47 ¾ a bushel.

Foodgrain output may touch 250 mt on better rabi harvest

VISHWANATH KULKARNI, THE HINDU BUSINESS LINE
NEW DELHI, JAN 28:
Despite the erratic monsoon, the country’s foodgrain production in the current crop year may touch the targetted 250 million tonnes (mt). “We are aiming for 250 mt this year. Though total foodgrain production cannot be the same as last year the kharif output is seen better-than-expected,” Agriculture Secretary, Ashish Bahuguna, told reporters.

Last year, the country’s food grain production stood at 257.44 mt with record rice output of 104 mt and wheat at 94 mt.

Bahuguna said wheat production this year is likely to be closer to last year’s level, while mustard and chana crop are looking good. The impact of frost hurting the mustard crop recently would be negligible, he said.

In its first advance estimates, the Agriculture Ministry had forecast a 10 per cent drop in kharif output at 117.18 mt, due to erratic monsoon and it expects to revise the numbers soon. The kharif output in 2011-12 stood at a record 129.94 mt.

Current rabi crops such as wheat and maize are doing well, Bahuguna said. However, the size of wheat output would be largely decided by the temperatures in February and March, Bahuguna said.

The Agriculture Secretary maintained that certain crops such as sunflower, jowar and bajra were facing stress. Rice transplantation was at a sluggish pace due to the poor availability of water in states such as Tamil Nadu and Andhra Pradesh, he said.

India to harvest wheat close to last year's record: Government

28 JAN, 2013, PTI
NEW DELHI: Wheat output is likely to be close to last year's record level of 93.90 million tonnes and conducive weather in the next two months is crucial for better yields, Agriculture Secretary Ashish Bahuguna said today.

He also said that the final food grains production estimate for last year would be revised upward by less than one per cent from the earlier estimated all-time high of 257.44 million tonnes.

"I am hopeful of achieving last year's wheat output level. Gains in crop yields would depend on good weather in February-March," Bahuguna told reporters on the sidelines of an event here.

The country was able to achieve a bumper wheat crop in the 2011-12 crop year (July-June) as crop yields rose due to conducive weather during February and March, he added.

Asked if production would be affected due to a lag in wheat sowing so far, Bahuguna said, "Sowing of major rabi crops including wheat is almost over now. Wheat area is down by 0.4 lakh hectare as compared to last year. If you compared with average acreage in the last five years, the area coverage is higher by 4.1 lakh hectares. There is nothing to worry".

According to official data, area sown under wheat has declined to 294.98 lakh hectares so far in the current rabi season, from 295.93 lakh hectares in the year-ago period.

Rabi (winter crop) sowing starts from October onwards and harvesting begins from February-end. The government has kept a conservative production target for wheat at 86 million tonnes for the current year.

On other rabi crops like coarse cereals, pulses and oilseeds, the Secretary said, "Sowing of most rabi crops is over now. Rabi production looks as good as last year".

States like Maharashtra, Andhra Pradesh and Tamil Nadu are likely to be affected as area under rabi crops are lower, while Karnataka, Rajasthan and Gujarat (which suffered drought during Kharif season) are doing well, he said.

During the rabi season of the 2011-12 crop year, the country had produced a record 127.50 million tonnes of food grains. The target for the current year's rabi has been kept at 120.5 million tonnes.

As far as pulses and oilseeds are concerned, Bahuguna said: "We are doing well, especially in chickpea (chana) and mustard seed. Frost damage in mustard seed is insignificant".

Sowing of crops like wheat, rice, maize and oilseeds like soyabean are taken up well by farmers as market for these commodities are developed, he said.

However, the same is not the case with minor oilseeds like sunflower and cereals like jowar and bajra, he observed.

Overall, rabi crops have been sown in 592.02 lakh hectare so far compared to 591.56 lakh hectare at this time last year.

India's PEC issues tender to export 125,000 T wheat

MUMBAI | Tue Jan 29, 2013
Jan 29 (Reuters) - India's state-run trading company PEC has issued a global tender to export 125,000 tonnes of milling wheat for shipment between Feb. 20 and March 31, a company statement said on Tuesday.

The stocks would be made available at Krishnapatnam port on the east coast. The bid closes on Feb. 18, it said.

This is part of a continuing Indian government programme to cut huge wheat stocks, taking advantage of current high global grain prices.

(Reporting by Deepak Sharma; Editing by Jijo Jacob)

Confounding imports when country deluged with its own sugar

Alternate glut and shortage of sugar every fourth year makes it imperative for the country to engage in exports and imports at regular intervals

Kunal Bose / Jan 29, 2013
Business Standard
The 2012-13 sugar season, which began in October with stocks of 6.5 million tonnes (mt), has once again exposed the inherent weaknesses of one of India’s leading agro-based industries. Prime Minister Manmohan Singh had an occasion to express his dislike for cycles in sugar production causing alternate glut and shortage of the sweetener every fourth year. The phenomenon makes it imperative for the country to engage in exports and imports at regular intervals. As the government machinery is found wanting in keeping pace with global market dynamics, many a time the country failed to realise the best export prices and make imports to overcome domestic supply shortfall when prices hit the bottom. Moreover, we are now found shockingly importing sugar when actually with some government help, we should be selling the commodity in the world market to be relieved of excess supply.

Raw sugar imports now total around 500,000 tonnes. Some white sugar too, came from Pakistan, itself desperate to get rid of a surplus, ahead of serious border issues. In his final committee meeting as president of Indian Sugar Mills Association ( ISMA), Gautam Goel made the pertinent point that for the industry to be able to clear cane dues in time to ensure sustainability of current levels of sugar production, one policy response had to be to check imports. In endorsement, former president of the ISMA, Om Prakash Dhanuka, says, rigid control of foreign origin sugar arrival is de rigueur when mills in north India, bearing the brunt of arbitrary increases in cane prices by states are not able to recover production cost from open market sugar sale. Import temptation of some when world sugar prices have hit the bottom is, however, understandable, says Dhanuka.

For the third season in a row, the country will be producing sugar in excess of domestic requirements of about 22 mt, notwithstanding delayed start in cane harvesting and crushing in some drought affected centres. The general expectation is 24.3 mt of sugar production in the season to end in October 2013. Based on past experience of occasional truant behaviour of weather disturbing cane supply to mills or fall in sugar recovery rate, a margin of error should accompany any output forecast at this point. In the meantime, however, a combination of highest opening stocks since 2007-08, good production outlook, though some two mt lower than last season, and market sentiment upsetting imports, has brought sugar prices down to a level proving hurtful for factories in Uttar Pradesh and other northern states. What also has worked against northern factories is a long, hard winter and lack of sunlight impacting recovery. Winter is also the time when sugar buying by bulk consumers like soft drinks and ice cream makers dips. At the same time, the dread of unpaid cane bills rising beyond acceptable levels was a pressure on factories to heavily unload sugar in the market even at the cost of sending prices down.

Facts on the ground in UP and Bihar are such that payment claims of farmers for cane supplies will reach alarming levels as the season advances. Sections in the government and industry think some amelioration will happen if a portion of sugar surplus is exported. The food ministry is contemplating issuing notification for exports to start. But ISMA Director General Abinash Verma says world sugar prices are ruling at levels to render our “exports completely unviable”. Indian sugar exports, according to Verma, become viable if white fetches prices in excess of $650 a tonne. The March white price at London Futures Exchange has sunk well below $500 a tonne. Raws at New York Intercontinental Exchange at 18.42 cents a pound are on bottom discovery. Incidentally, rising global inventories have led Goldman Sachs to scale down its price forecast for raws from 22 cents a pound by a few notches. Dhanuka thinks New Delhi could still make exports a viable proposition by giving subsidies, such as defraying cost of transportation allowed by WTO. But what about the industry heeding the advice of Food Minister K V Thomas that factories should focus on improving “technical efficiency to reduce conversion cost in a bid to compete globally”. In case the government finally redeems its commitment to the ethanol blending programme, factories will realise better value for cane by-product, molasses.

Verma is right that world sugar prices will not be export encouraging for us in the near future. A Barclays commodity specialist says, “We expect the third consecutive global surplus in 2012-13 with stronger-than-expected production in Brazil to continue to pressure prices.” India, Thailand and Russia have come for modest downward revisions to production projections. But Rabobank says all this has been “offset by upward revisions to output estimates in Brazil, Mexico and some other sugar producing centres”. The Brazilian sugar industry association UNICA says the country’s centre-south region is having a record output of 34.1 mt tonnes in 2012-13, up from its previous forecast of 32.7 mt. What is more, consultancy group Datagro is projecting an all-time high sugarcane crop of up to 590 mt next season. No wonder, International Sugar Organisation has raised global sugar surplus estimate to 6.18 mt. Rabobank, however, puts it at 6.6 mt. Quite discouraging for sugar prices.