India Steel: Coked Out
Oil Climbs 4% on Egypt Turmoil, US Growth.. GOLD SILVER GAINED 3% FRM LOWS AS TENSTIONS IN ARAB COUNTRY..
U.S. crude oil futures extended gains and were up more than $3 a barrel on Friday, lifted by concerns about citizen protests in Egypt and as data showed a preliminary 3.2 percent annual growth rate in the United States.
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Smoke billows up into the late evening sky on January 28, 2011 in Cairo, Egypt.Thousands of police are on the streets of the capital. Hundreds of arrests have been made in an attempt to quell demonstrations. |
U.S. light, sweet crude [CLC1 87.74 
Protests in Egypt and the government's response intensified, making investors more wary about the unrest.
Earlier, oil prices received a boost from news that the U.S. economy gathered speed in the fourth quarter, fueled by the biggest gain in consumer spending in more than four years and strong exports.
"There is growing concern about the situation in Egypt and Yemen and there may be worry about not going into the weekend being too short," said Phil Flynn, analyst at PFGBest Research in Chicago.
In London, Brent crude [LCOC1 98.66
Gold Above $1,340 as US Stocks Slide on Egypt Protests.. SILVER MADE $28 IT CAN RISE MORE IF $28.4 breaks..
Gold Above $1,340 as US Stocks Slide on Egypt Protests..
Gold rose on Friday, recovering from a steep fall earlier after the U.S. economy expanded in the fourth quarter, while U.S. stocks fell as traders feared the outcome of the escalating protests in Egypt.
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Spot gold [XAU=X 1341.3
U.S. gold futures [GCG1 1340.4
The metal earlier touched a four-month low of $1,308.00 an ounce, having fallen 2.6 percent on Thursday on a run of firmer than expected U.S. economic data which boosted confidence in the recovery. Though gold later recovered, it still looks fragile.
The U.S. economy gathered speed in the fourth quarter with the biggest gain in consumer spending in more than four years and strong exports offering the clearest signals yet that a sustainable recovery is underway.
"Though the GDP data came in slightly below expectations... (its acceleration) was driven by two factors which are very important when looking forward, and that is the more important factor in assessing the future course of the U.S. economy," said Quantitative Commodity Research consultant Peter Fertig.
"That is private consumption and exports, which came in better than expected," he said. "With the Dow Jones index trading this week above 12,000, that all indicates that the U.S. economy is on an expansionary path."
The dollar extended gains versus the euro and trimmed losses against the yen in volatile trading on Friday after the data, while European shares lifted from lows and New York stocks opened slightly higher on Wall Street.
"One of the dangers in the gold price this year is that if confidence rises, and U.S. growth and the economic recovery continues, gold's allure as a hedge against risk is somewhat diluted," said VM Group analyst Carl Firman.
"At the moment you probably find that money is going into riskier assets, perhaps with higher returns."
ETF Investment Eases
Investment demand for gold has been soft this year, with holdings of the SPDR Gold Trust [GLD 130.87
London's ETF Securities reported a 1.3-ton outflow from its gold exchange-traded products on the same day.
The Wall Street Journal said on Friday hedge fund SHK Asset Management liquidated a U.S. gold futures position this week valued at over $850 million, more than 10 percent of the main U.S. futures market.
While the outlook for ETF and futures investment is uncertain, physical demand for gold, particularly from Asia, is expected to be a major factor underpinning prices this year.
"The China Gold Association estimates... that the demand for gold in the first half of the year will rise by 15 percent year on year, citing growing demand for alternative investments and protection against inflation," said Commerzbank in a note.
"Already last year, China's gold demand posted double-digit growth, according to the World Gold Council," it said.
Spot silver [XAG=X 27.87
"Silver ETF holdings fell by 122 tons on the week (and) are down 550 tons from their peak," said RBS Global Banking & Markets in a weekly report. "ETF holdings represent 66 percent of 2010 world mine output."
Platinum was last near $1,799.49 an ounce against $1,781 and palladium last touched $811.50 against $802.22.
Oil min wants Vedanta to surrender its rights, disputes
Though the Prime Minister's Office had earlier this month asked the ministry to decide on giving approvals to the USD 9.6-billion acquisition on merit, the Oil Ministry has slipped in 11 pre-conditions that are unlikely to be accepted by the London-listed firm.
Sources in know of the development said the ministry has proposed to give "in-principle approval" to the transaction, if Vedanta agrees to withdraw pending lawsuits and accepts ministry's diktat on future petroleum operations in Cairn's mainstay Rajasthan block.
The ministry proposal is based on recommendation of the oil regulator Directorate General of Hydrocarbons (DGH), who is supposed to be the custodian of the contracts oil companies sign with the government for oil and gas exploration and production.
The contracts, called Production Sharing Contract (PSC), provide for a dispute resolution mechanism but DGH wants Vedanta to surrender all its rights under the same in order to get approval for acquiring 40 to 51 per cent stake in Cairn.
Sources said the pre-conditions, which have been referred to the Law Ministry to concurrence, states that Vedanta has to "give undertaking that the decision of the government would be final and binding" on all disputes on petroleum operations.
Further, it says the "government decisions/conditions (have to be) unconditionally accepted (by Vedanta) on the issues litigated by Cairn India and their associates".
The DGH on January 7 advised Oil Ministry to ask Vedanta to accept its decision on disputes unconditionally even though Cairn had won one of the three issues under arbitration.
Sources said the ministry also wants Vedanta to agree to consider the royalty paid on crude oil produced from the Rajasthan block in the project cost and its profits calculated thereafter.
As per PSC, a company is permitted to recover all project costs from the sale of oil or gas produced from a field before calculating profits for itself and the government.
State-owned Oil and Natural Gas Corp (ONGC) holds a 30 per cent stake in Rajasthan block RJ-ON-90/1, but pays the royalty on the entire quantum of production, as it is the licencee of the block.
If the royalty paid by ONGC on behalf of Cairn is taken into consideration while calculating the project cost, this would lower the profits of the Scottish energy firm, which does not pay royalty on its 70 per cent share of the projected 12 million tonnes per annum output from the block.
Gold ETFs help Portfolio diversification
THE investible potential of gold as an asset class has been a function of jewellery and industrial demand, inflation outlook, strength of the dominant currency, geo-political stability and the gold supply variable. Given the historical and contemporary pervasiveness of gold as a store of value, and to a certain extent, a medium of exchange, gold has adopted a tendency of behaving like a natural currency. Therefore, the investment demand for gold tends to rise in the case of adverse economic conditions, rising inflation, weakening dollar, or general socio-political instability.
The 15.45% CAGR run-up in gold prices since 2000 was largely attributed to the surfeit liquidity in the early part of the decade, while in the latter half, the turbulent economic conditions, post the sub-prime crisis, contributed to the gold rally. However, despite the teetered recovery in the global economic environment, the optimistic outlook on gold remains unchanged. And here's the reason why.
Today's geo-political climate has become increasingly volatile, given the ongoing wars in the Middle-east, and the pursuit of nuclear arms by autocratic regimes. This uncertainty has increased further on account of rising tensions in the far-east Asian region.
Meanwhile, the woes of the global financial economy remain subdued at best. The world's major economies have taken on extensive amounts of debt to keep their economies afloat. To add to that, the economic hardships of Western Europe haven't gone away either. The US economic performance, too, remains modest, with the unemployment situation continuing to worsen.
Albeit the fear of a double-dip recession in the US and the EU may be unwarranted, yet there is a rising speculation, bordering to near certainty that the Fed-led quantitative easing may be on cards. Consecutively, the key global debt markets continue to remain defensive and maintain a relatively-high risk perception, which in turn, fuels the investment demand for gold.
Also, traditionally, the gold demand has a seasonal flavour with the intra-year peaking in around November-December. This is attributable to post monsoon festivities in India, corresponding gold inventory expansion by American and European retailers, and the week-long national celebrations in China. Besides, the central banks (bankers) continue to remain net buyers of gold. The interplay of these factors provide a potent case for investment in gold.
But, from the retail investor point of view, the physical investment in gold has a minor side-effect. Buying physical gold involves the risk of theft, misplacement and potential wrong-pricing. Additionally, when an investor needs to sell his physical gold, again at that point, he/she has to go through the inconvenient route of valuation, bargaining, transaction and delivery.
All these angles involve risk, skill, and time — making the whole process inconvenient. But thankfully, an alternative method to invest in gold exists. That too without the inconvenience of the physical transaction — that is the Gold Exchange Traded Fund (GETF).
Gold ETF is nothing but pure gold, traded online through a medium of exchange. Normally, each unit of a gold ETF is worth approximately 1 gram of gold at any point of time. The investors' take-away from GETF is that it allows the investor to invest in gold without bothering for the purity, security or liquidity of gold investment that is attendant with gold hoarding. GETF's online tradability and transactability is exactly like any other stock scrip, making buying and selling an almost intra-day day affair — an idea quite difficult with physical gold.
In other words, what GETF does is that it gives you the ability to buy, sell, or hold gold at convenience. This idea, though relatively new in India, is quite popular elsewhere in the world. (has caught majorly elsewhere in the world). In India too, with rising awareness, Gold ETF is gaining ground.
Soros Cuts Gold Holdings for Third Quarter as Paulson Holds Bet
Nov. 16 (Bloomberg) -- George Soros, who's described gold as the
"ultimate asset bubble," cut his holdings in the SPDR Gold Trust for a
third quarter, while rival fund manager John Paulson stuck with his
bet by maintaining the largest stake.
Soros Fund Management LLC sold 547,689 SPDR Gold shares as of Sept.
30, according to a filing yesterday with the U.S. Securities and
Exchange Commission. The disposal represented 10 percent of Soros's
holding in SPDR Gold, according to Bloomberg calculations, and follows
sales in the first two quarters. Still, SPDR Gold remains the Soros
Fund's largest single equity holding.
Gold has soared to a record this year as investors sought protection
against weaker currencies and a possible resurgence of inflation.
Soros, who made $1 billion breaking the Bank of England's defense of
the pound in 1992, described gold as a bubble in January, and also
said buying at the start of one is rational. Since then he's cut the
SPDR Gold stake by 24 percent.
New York-based Paulson & Co. maintained its 31.5 million SPDR Gold
Trust shares, or 7.4 percent of the U.S. exchange- traded fund, as of
Sept. 30, according to a filing yesterday. Eric Mindich's Eton Park
Capital Management LP sold 2 million shares in the period, a separate
regulatory filing showed.
Spot gold, which touched at record $1,424.60 an ounce on Nov. 9, has
gained 24 percent this year and was at $1,359.90 at 11:27 a.m. in
Singapore. Fund managers including Paulson added the metal after the
2008 financial crisis shook investors' confidence in currencies. The
SPDR Gold Trust is the biggest exchange-traded fund backed by bullion.
Form 13F Obligations
Money managers who oversee more than $100 million in equities must
file a Form 13F with the Securities and Exchange Commission within 45
days of each quarter's end to show their U.S.-listed stocks, options
and convertible bonds. The filings don't show non-U.S. securities or
how much cash the firms hold.
Deutsche Bank AG is among banks forecasting more advances for gold
even after its rally. Precious metals were among the "safest long
positions," Michael Lewis, global head of commodities research at
Deutsche Bank, said last week. Gold may soar to $3,800 an ounce within
three years, Myles Zyblock, chief institutional strategist at RBC
Capital Markets, said in October.
Soros Fund Management's holding in SPDR Gold Trust shares reached 6.2
million as of Dec. 31, 2009, according to an earlier 13F filing. With
the sales over the past three quarters, that's been reduced by 24
percent, according to Bloomberg calculations.
SPDR Gold Trust remained Paulson & Co's top holding as of the end of
September, valued at about $4 billion, compared with $3.83 billion at
the end of June. The New York-based firm sold 2.7 million depositary
receipts in AngloGold Ashanti Ltd., its second-largest holding, in the
third quarter, the filing showed.
Mindich is a former Goldman Sachs Group Inc. partner who began New
York-based Eton Park in 2004 with $3.5 billion. SPDR Gold shares were
his second-largest equity holding in the third quarter after the sale.
Paulson has maintained 31.5 million SPDR Gold shares since March 31,
2009, according to 13F filings.
Soros said gold's rally may continue, Reuters reported in September,
citing an interview. "I called gold the ultimate bubble which means it
may go higher but it's certainly not safe and it's not going to last
forever," Soros was cited as saying.
--With assistance from Saijel Kishan in New York. Editors: Jake Lloyd-
Smith, James Poole
To contact the reporter on this story: Chanyaporn Chanjaroen in
Singapore at cchanjaroen@bloomberg.net
To contact the editor responsible for this story: Jim Poole at
Jpoole4@bloomberg.net
2QFY11 Results Update: Tata Steel, Tata Power, Ranbaxy Laboratories and Jubilant Organosys
Tata Steel (TATA IN; Mkt Cap USD11.9b, CMP Rs606, Neutral)
- Tata Steel's 2QFY11 consolidated adjusted PAT declined 30% QoQ to Rs13.1b, which was above our estimate of Rs7.6b, largely due to better than expected performance of Tata Steel Europe (TSE). TSE's average realization rose 5% QoQ to US$1,108/ton contrary to the general trend of declining prices.
- Tata Steel India's (TSI) adjusted PAT declined 14% QoQ to Rs13.7b (against our estimate of Rs12.2b) despite a 19% QoQ jump in steel volumes. The realization decline was slightly higher than our expectation. The realization of long products declined 12% QoQ to Rs27,500/ton and that of flat products declined 5% QoQ to Rs35,589/ton. The blended realization declined 9% QoQ to Rs39,139/ton.
- TSI's EBITDA declined 10% QoQ to Rs26.3b (up 37% YoY). EBITDA per ton fell 24% QoQ to Rs14,758/ton (US$321/ton). TSI's performance was better than our estimates of Rs24.4b as cost increases were less than our expectations.
- EBITDA at TSE's operations declined by 35% QoQ to US$197m due to 5% lower volumes and a margin squeeze due to a 20% increase in raw material costs. EBITDA per ton declined 30% QoQ to US$55/ton.
To raise Rs70b equity to fund high RoI projects; Jamshedpur expansion on track; Upgrading FY11 EPS 14%
- Tata Steel's board has approved the raising of Rs70b of equity related instruments for investing in high RoI projects (Indian Greenfield and overseas Raw Material). This will dilute equity by 10-15%.
- The Jamshedpur expansion to 10mtpa is on track to be completed by December 2011. We are upgrading FY11 EPS by 14% to Rs74.4 to factor in stronger than expected performance in 2QFY11. The stock trades at an EV/EBITDA of 6x FY12E. Although valuations are not demanding, the near term outlook is challenging. Equity dilutions and significant capital deployment in future projects will limit the upside. Maintain Neutral.
Sanjay Jain (SanjayJain@MotilalOswal.com)
Tata Power (TPWR IN; Mkt Cap USD7.4b, CMP Rs1, 376, Neutral)
- Exceptionals boost standalone/consolidated performance: Tata Power's 2QFY11 standalone revenue was Rs15.7b (down 9% YoY), EBITDA was Rs2.9b (down 31% YoY), and net profit was Rs2.5b. Reported PAT included several one-offs: (1) forex gain of Rs365.5m, and (2) Rs100m reversal of provision on doubtful debt. Adjusted for this PAT was Rs2.1b (up 35% YoY), marginally higher than our estimate of Rs1.8b, largely due to higher dividend income (Rs800m). Reported consolidated profits were Rs6.8b and adjusted for one-offs, the profit was Rs3.5b (up 12% YoY).
- Coal mining EBIT up 6% YoY, stake sale transaction yet to take place: In 2QFY11, Tata Power's share of revenue from coal mining companies (KPC/Arutmin) was Rs15.4b (up 33% YoY). Coal production was 12.4mt (v/s 15.5mt) and realizations were US$73.7/ton (v/s US$57.9/ton in 2QFY10). Despite higher realizations, the contribution was limited due to higher production cash costs of ~US$38/ton (v/s US$31/ton in 2QFY10). EBIT for mining companies was Rs3.6b, up a mere 6% YoY. The transaction of ~15% stake sale in a mine Holdco to Olympus to raise US$300m has not yet been affected, pending approval from lenders and last date to sign the agreement had been extended to 19 November 2010.
- Subsidiary/associate companies post robust performance: In 2QFY11 NDPL (51% stake) posted net profit of Rs741m (up 189% YoY) given higher incentives of Rs550m due to the achievement of targeted cuts in AT&C losses. Powerlinks Transmission (PTL, 51% stake) reported PAT of Rs275m (up 34% YoY) due to higher capitalization and availability based incentives. Tata Power Trading Company (TPTL, 100% stake) reported a loss of Rs20m, v/s Rs16m in 2QFY10.
- Valuations and view: We expect TPWR to report consolidated net profit of Rs18.8b in FY11 (up 27% YoY) and Rs25.4b in FY12 (up 35% YoY). We arrive at an SOTP-based target price of Rs1,265/share. At CMP, the stock trades at a PER of 18x FY11E and 14x FY12E. Neutral.
Satyam Agarwal (Agarwals@MotilalOswal.com)/ Nalin Bhatt (NalinBhatt@MotilalOswal.com)
Ranbaxy Laboratories (RBXY IN; Mkt Cap USD5.6b, CMP Rs585, Sell)
Ranbaxy's 3QCY10 operating performance was below our estimates. Key highlights are:
- Ranbaxy's 3QCY10 net sales grew 9.7% to Rs18.9b (vs est of Rs18.3b) while reported PAT grew 172% (on a low base) to Rs3.1b (vs est Rs2.1b). EBITDA de-grew 43% to Rs1.38b (vs est. of Rs1.84b).
- Revenue growth was mainly led by 95% YoY increase in the revenues from USA and 22% growth in India formulations business (20% in INR-terms). This growth was partly tempered down by 4% decline in Europe, CIS & Africa region and a 19% decline in the AsiaPac & ME region.
- EBITDA de-grew 43% to Rs1.38b (vs est of Rs1.84b) while EBITDA margin was at 7.2% (vs est of 9.8%). EBITDA was impacted by some provision and write-offs. Excluding these write-offs, EBITDA would have been in line.
- Reported PAT at Rs3.1b was higher than our estimate of Rs2.12b mainly due to Rs2.6b of MTM forex gains on loans and forex hedges. Adj PAT was up 95% (on a low base) to Rs1b vs our estimate of Rs1.14b.
Valuation and view: Sustaining current valuations is mainly dependent on upsides from Lipitor & Nexium, it is imperative for Ranbaxy to salvage the upsides from these two opportunities which account for 60-70% of overall Para-IV upsides. We expect core EPS of Rs10.1 for CY11 and Rs15.9 for CY12 (assuming part recovery in the US). Our estimates exclude MTM forex gains and one-off upsides from Para-IV opportunities. Ranbaxy is currently valued at 49x CY11E core EPS and 31x CY12E core EPS. Our current DCF value of all potential Para-IV upsides is Rs91/sh. We believe that current valuations are discounting the best-case scenario for both the core business as well as for the Para-IV upsides. We downgrade the stock to Sell with TP of Rs490 (25x CY12E EPS + FTF DCF value of Rs91/sh).
Nimish Desai (NimishDesai@MotilalOswal.com)
Jubilant Organosys (JOL IN; Mkt Cap USD1.2b, CMP Rs313, Neutral)
Jubilant Organosys 2QFY11 performance was below estimates. Key highlights.
- Topline grew by 5.7%YoY to Rs9.88b (vs estimate of Rs10.49b), while Adjusted PAT increased by 42.3%YoY on a low base (impacted due to Rs428m of forex losses) to Rs821m (vs estimates of Rs948m).
- Overall, the Pharma and Life Sciences Products and Services (PLSPS) business reported revenue growth of 2.7%YoY to Rs8.5b while Agri & Performance Polymers (APP) business recorded 29%YoY growth to Rs1.38b.
- EBITDA declined by 16.3%YoY at Rs1.55b and was below our estimate of Rs1.96b. EBITDA margins at 15.7% (down 410bps) were lower than estimate of 18.7% due to pricing pressure and adverse currency movement and adverse product mix in PLSPS segment.
- Adjusted PAT increased by 42.3%YoY to Rs821m (vs estimate of Rs948m). Adjusted PAT reported growth despite decline in EBITDA on account of low base (impacted due to Rs428m of forex losses) and lower interest outgo due to reduction in debt.
We believe Jubilant is well positioned to exploit the expected increase in outsourcing from India. Customer inventory de-stocking for CRAMS companies is coming to an end and we expect growth to rebound in FY11 as customers are likely to commence re-stocking. Over the past few years, Jubilant has made two large acquisitions in North America which has strengthened its presence in the sterile segment but has also resulted in a highly leveraged balance sheet. We also believe that some of the past acquisitions (like Draxis) have been made at expensive valuations resulting in extended payback periods. High debt, large FCCB redemption (US$202m in May-2011 including YTM) and low RoCE (8-12%) remain an overhang. Based on our revised estimates the stock is valued at 15.4x FY11E EPS and 12.8x FY12E EPS. Maintain Neutral.
Nimish Desai (NimishDesai@MotilalOswal.com)
sugar update
Sugar has almost doubled in the past year to the highest level since 1981 as rains delayed the harvest in Brazil, while a drought and a shift to other crops made India a net buyer for the first time in three years. Increasing prices may boost costs for Indonesia, Pakistan and Egypt as stockpiles may fall to the lowest ratio versus consumption in at least a decade.
Buyers face a "crunch time" Jonathan Kingsman, managing director of Kingsman SA, a Lausanne, Switzerland-based sugar broker and research company, said yesterday at a conference in London. "This situation could get worse."
India needs to import 6 million to 7 million tons in the season started Oct. 1, compared with 3.5 million tons in the previous year, to meet a shortfall in output, which would be little changed at 14.5 million to 15 million tons, Bajaj said. Purchases in 2010-2011 may drop to 4 million to 5 million tons as production rebounds to 19 million to 20 million tons, he said.
"If we are going to double our imports, you can have a wild guess what's going to happen," Bajaj said yesterday in an interview in Mumbai. There's a "consensus on the fact that it will definitely reach 30 cents
Speculator Bets
Not everyone is bullish. Sugar may decline to 19 cents a pound by the end of January as speculators exit the market after prices failed to repeat recent gains, according to Jean Bourlot, Morgan Stanley's former head of agriculture trading. Raw sugar will likely average 16 cents in the fourth quarter of next year, Standard Chartered Plc said in an e-mailed report yesterday.
Hedge funds and other large speculators have cut net long positions, or bets on price gains, in New York raw-sugar futures to the lowest level in more than six months, according to U.S. Commodity
Futures Trading Commission figures on Nov. 20.
Sugar at 30 cents would be the highest level since January 1981. The price reached 25.43 cents on Sept. 30, a 28-year high. Raw-sugar futures for March delivery fell 0.3 percent to 22.08 cents in New
York yesterday. White, or refined, sugar for March delivery gained 0.1 percent to $599.50 a ton in London.
Duty-Free Imports
Bajaj has contracted to buy 700,000 tons of raw sugar to increase output at its 14 factories to 1.4 million tons this season, up from 600,000 tons in the previous year, Bajaj said. India has extended
duty-free imports of raw sugar until Jan. 1, 2011 and white sugar until March 31 to bolster supplies.
India's sugar production may jump to 17.68 million tons in the season started Oct. 1, according to interviews with 631 farmers across six states. Global sugar output may rebound in the 2011-2012 season with a "bang" as high prices encourage farmers to plant more, Bajaj said.
These high prices will create a situation where you have a mother of all crops at some point that would depend on weather and prices of alternative commodities.
The world may have a surplus of 500,000 tons in 2010-2011, compared with an estimated 7.2 million tons deficit this season, the International Sugar Organization said.
The government fixed the prices at Rs190 to Rs195, which the mills have to pay to the farmers for procuring sugarcane for the year FY2010.
Mills are very comfortable with the pact of ISMA as the Q1 10 and Q2 10 would be very interesting quarters for the mills. Mills are expected to record superior profit in the next coming quarters on account of higher realization prices.
--
Sugar update
Sugar has almost doubled in the past year to the highest level since 1981 as rains delayed the harvest in Brazil, while a drought and a shift to other crops made India a net buyer for the first time in three years. Increasing prices may boost costs for Indonesia, Pakistan and Egypt as stockpiles may fall to the lowest ratio versus consumption in at least a decade.
Buyers face a "crunch time" Jonathan Kingsman, managing director of Kingsman SA, a Lausanne, Switzerland-based sugar broker and research company, said yesterday at a conference in London. "This situation could get worse."
India needs to import 6 million to 7 million tons in the season started Oct. 1, compared with 3.5 million tons in the previous year, to meet a shortfall in output, which would be little changed at 14.5 million to 15 million tons, Bajaj said. Purchases in 2010-2011 may drop to 4 million to 5 million tons as production rebounds to 19 million to 20 million tons, he said.
"If we are going to double our imports, you can have a wild guess what's going to happen," Bajaj said yesterday in an interview in Mumbai. There's a "consensus on the fact that it will definitely reach 30 cents
Speculator Bets
Not everyone is bullish. Sugar may decline to 19 cents a pound by the end of January as speculators exit the market after prices failed to repeat recent gains, according to Jean Bourlot, Morgan Stanley's former head of agriculture trading. Raw sugar will likely average 16 cents in the fourth quarter of next year, Standard Chartered Plc said in an e-mailed report yesterday.
Hedge funds and other large speculators have cut net long positions, or bets on price gains, in New York raw-sugar futures to the lowest level in more than six months, according to U.S. Commodity
Futures Trading Commission figures on Nov. 20.
Sugar at 30 cents would be the highest level since January 1981. The price reached 25.43 cents on Sept. 30, a 28-year high. Raw-sugar futures for March delivery fell 0.3 percent to 22.08 cents in New
York yesterday. White, or refined, sugar for March delivery gained 0.1 percent to $599.50 a ton in London.
Duty-Free Imports
Bajaj has contracted to buy 700,000 tons of raw sugar to increase output at its 14 factories to 1.4 million tons this season, up from 600,000 tons in the previous year, Bajaj said. India has extended
duty-free imports of raw sugar until Jan. 1, 2011 and white sugar until March 31 to bolster supplies.
India's sugar production may jump to 17.68 million tons in the season started Oct. 1, according to interviews with 631 farmers across six states. Global sugar output may rebound in the 2011-2012 season with a "bang" as high prices encourage farmers to plant more, Bajaj said.
These high prices will create a situation where you have a mother of all crops at some point that would depend on weather and prices of alternative commodities.
The world may have a surplus of 500,000 tons in 2010-2011, compared with an estimated 7.2 million tons deficit this season, the International Sugar Organization said.
The government fixed the prices at Rs190 to Rs195, which the mills have to pay to the farmers for procuring sugarcane for the year FY2010.
Mills are very comfortable with the pact of ISMA as the Q1 10 and Q2 10 would be very interesting quarters for the mills. Mills are expected to record superior profit in the next coming quarters on account of higher realization prices.
Steel Sector Update April 2009
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