News & Report Analysis India, world`s 3rd largest

M o n d ay 2 3 , M a rc h 2015
News &
Report Analysis
Currency Market
Precious Metal
Base Metal
Energy Market
q India, world’s 3rd largest steel producer
overtaking US
q Odisha negotiating with Center for
allocating iron ore mine to Posco
q Goa mining may not start till Oct:
CM Parsekar
q Miners warn new Mines Bill will
escalate mining cost
q JSPL upset over bid rejection
US equity markets gained more than 1 per
Jones industrial average rose 168.62 points, to
18,127.65, and the S&P 500 gained 18.83 points,
to 2,108.10. The Nasdaq Composite added
34.04 points, to 5,026.42, a 15-year high. Asian
Equities are trading in a positive territory amid
positive US cues. Asian shares started the week
on a strong note on Monday after a weaker U.S.
dollar helped fuel solid gains on Wall Street.
The greenback took back a bit of lost ground in
Asian trading, with the dollar index .DXY edging
up about 0.1 percent to 98.024, moving well
away from last week's low of 96.628.
Currency Market
The US dollar Index traded weak by 2.1
percent and suffered its largest one-day loss
since March 18, 2009 last week, when Ms.Yellen,
provided a grim account of the U.S. economy’s
outlook during the Federal Reserve policy
meeting. Also, downbeat US manufacturing,
industrial production and housing data exerted
pressure on the greenback. US Dollar Index made
a weekly low of 94.77 and closed at 98.17 on
Friday. The shared currency witnessed volatility
last week after FOMC forecast and appreciated
by almost 3%, currently it is consolidating near
to 1.10 levels. Sterling is on the brink to test the
level of 1.50 after dollar tumbled from its multiyear highs. The Indian Rupee appreciated by 1.1
percent last week increased selling of dollars
by banks and exporters ahead of the US Fed
monetary policy statement along with dollar's
USD/INR Overnight VAR
Data releases today
USD Existing Home Sales
EUR Consumer Confidence
17:00
16:00
terrain on the back of plunge in dollar. The Dow
15:00
Finally, US equity bourses ended in a positive
14:00
week, following the cues from US FED meeting.
13:00
the US dollar which continued to be lower last
12:00
investors continued to take relief out of drop in
11:00
across the glove advanced last week as
USD/INR - 20/03/15
62.44
62.46
62.48
62.50
62.52
62.54
62.56
62.58
9:00
cent on last Friday while other major equities
10:00
Daily
2
Monday 23, March 2015
0.3514
Forecast
Previous
4.91M
4.82M
-6
-7
Source : Mecklai Financial
weakness against other major currencies
overseas supported gains. Further, international
crude oil prices fell and the trade deficit.
Against the yen, the dollar stood at 120.05
yen JPY=, nearly flat on the day and well
below Friday's session high of 121.205. The
euro traded at $1.0789 EUR=, down about 0.3
percent and though and well above a 12-year
trough of $1.0457 logged a week ago, after
which the Fed's statement helped it mark its
biggest weekly rise against the greenback in
three years. Concerns about Greece's ongoing
fiscal woes were likely to cap the euro's upside,
even after European Union leaders welcomed a
pledge on Friday from Greece to meet creditors'
demands for a broad package of economic
reform proposals within days to unlock the cash
Athens needs to avoid stumbling out of the euro
zone. Commodity currencies benefited after the
dollar's rally paused. The Australian dollar added
about 0.2 percent to 0.7785 AUD=D4, well above
a six-year nadir of $0.7561 hit on March 11
Today, Indian Rupee opened marginally
higher at 62.38 versus a close of 62.46 on Friday.
Euro recovered sharply to 1.08 despite tensions
in Greece and Russia threatening Denmark on
joining the NATO alliance. Dollar profit booking
continued through the weekend, as DXY
3
Monday 23, March 2015
Daily
6 mth
LIBOR
Major
Currencies
Today’s
Crosses
Spot
Cash
v/s INR
Forward Rates v/s INR (Export/ Import)
March
April
May
August
November
February
62.37/ 38
62.34/ 34
62.47/ 47
62.94/ 94
63.32/ 32
64.54/ 54
65.72/ 72
66.80/ 81
-
-
-
0.49/0.50
0.67/0.68
0.85/0.87
1.23/1.29
1.53/1.64
1.80/1.97
EUR / USD
1.0803
67.37/ 38
67.34/ 35
67.49/ 49
68.02/ 02
68.46/ 46
69.89/ 88
71.30/ 30
72.61/ 61
0.14
USD / JPY(100)
120.00
51.97/ 98
51.95/ 95
52.06/ 06
52.47/ 48
52.81/ 81
53.90/ 91
54.99/ 00
55.99/ 00
0.68
GBP / USD
1.4930
93.11/ 13
93.07/ 09
93.27/ 28
93.97/ 98
94.49/ 50
96.28/ 28
98.02/ 02
99.65/ 65
-0.69
USD / CHF
0.9787
63.71/ 72
63.68/ 69
63.83/ 83
64.33/ 33
64.84/ 85
66.35/ 38
67.82/ 90
69.15/ 26
3.06
AUD / USD
0.7797
48.62/ 63
48.60/ 61
48.69/ 69
48.96/ 96
49.17/ 17
49.87/ 88
50.56/ 56
0.40
USD / INR
-
ATM Options (put/call)
0.15
51.26/ 25
Source : Mecklai Financial
retraced ground to 98 as Fed’s dovish forecasts
for inflation and growth hung over investors.
However we expect DXY to regain lost ground
as data improves, with Janet Yellen remaining
vague about the exact timing of the interest
rate hikes.US Equities were higher on a weaker
dollar, since the expectation was that a stronger
dollar was hurting profits of US MNC’s operating
abroad, with Dow up almost 169 points on
Friday. Asian equities too, are in green today
with Nikkeii up 167 points on open. Domestic
equities opened in green, but will remains
weak ahead of an F&O expiry and a fiscal year
end this week. The rupee has opened stronger,
but gains on a weaker dollar will be capped by
listless trading in domestic equities and is likely
to trade in the range of 62.20 – 62.60 today.
Precious Metal
Gold commodity posted strong gains
last week while also managed to cut back
all of its losses in 2015 as sliding US Dollar
Market Highlights - Gold (% change)
Gold
Gold (Spot)
Gold
(Spot -Mumbai)
Comex Gold
MCX Gold
(Apr’15)
Unit
Last
Prev.
day
as on March 20, 2015
WoW MoM
YoY
$/oz
1182.2
0.96
2.0
-2.1 -11.2
Rs/10
gms
25900.0
0.39
0.0
-3.4 -13.1
$/oz
1184.8
1.34
2.8
-1.3 -11.7
Rs /10
gms
26182.0
0.85
1.1
-0.3 -12.7
Source: Angel Broking
support investment in yellow metal. Bullion
in week ending 13th March fell heavily as
markets moved into the FED monetary policy
on expectations that policy outcome would
be hawkish. However as of the actual policy
update, FOMC in its meeting came out with
more dovish expectations over US economy
and interest rates in the near-term, thus pushing
the US Dollar lower while adding value to Gold.
On the physical side, there were small signs of
improvement with premiums in Shanghai Gold
Exchange staying steady at $6-$7 an ounce. Locally
in India, buying on physical side is expected to
gain as markets await wedding season starting
April. While markets lack any major data related to
monetary policy from the US next week. We have
the important CPI YoY number, which if disappoints
would further act supportive for an extended easy
rate policy by the FED.
As Gold commodity is expected to remain
ranged with positive bias, we feel largely similar
move could be witnessed in Silver commodity
too. However, as base metals broadly expected
to stay on a positive footing, we expect its overall
outperformance over Gold may extend in
coming sessions.
Last week, spot silver prices in the
international markets traded higher in tandem
with rise in gold prices. Weak dollar further
boosted the metal prices acting as a positive
Daily
factor. Spot silver prices in the international
markets rose by 7.04 percent and closed at
$16.73/oz.
On the MCX, silver prices rose by 6.35 percent
and closed at Rs.37789/kg. On a intra-day session,
precious metals to trade sideways although the Fed
has ended its pledge to be patient in normalizing
monetary policy it maintained a cautious outlook
on the US economy. The labor market remains
firm, while weak housing sector remains a cause
of concern for the Fed. Rising output in Libya, and
Iran's wish to export more oil if it clinches a nuclear
deal that would remove Western sanctions, had
also pressured crude prices. Last week, WTI oil
prices in the international markets rose by 1.96
percent and closed at $45.72/bbl. On the MCX,
crude prices rose by 2.86 percent and closed at
Rs.2948/bbl.
Base Metal
Last week, base metals prices ended with
upward momentum on the LME apart from
Nickel. The Fed dropped an assurance it will be
"patient" in raising interest rates, but indicated
that doesn't necessarily mean the central bank
will tighten monetary policy in June. The US
central bank also said higher interest rates in
April are unlikely and it won't tighten until it
is "reasonably confident" inflation will return
to its target and the labor market improves
further. In the Indian markets, base metals
traded higher apart from Nickel and Lead in
line with international trends. On Wednesday,
LME Copper prices jumped by 3.1 percent to
close at $6040.5/tonne as metals markets and
Chinese equities received support after Premier
Li Keqiang said China has a lot of room to
manoeuvre its policy and boost its economy.
Further, the US central bank said data suggest
economic growth has moderated; fuelling
speculation it won't be in a rush to raise interest
rates supported prices of prices of the red metal.
4
Monday 23, March 2015
Energy Market
Oil prices traded lower last week on both
sides of the Atlantic with WTI and Brent losing
its value. Rebounding dollar and Kuwait's stance
that OPEC had no choice but to keep producing
in an oversupplied market undercut the
rally. While oil firms have slashed exploration
budgets and the number of U.S. rigs drilling for
oil has fallen to four-year lows, shale output in
the United States has barely slowed. U.S. crude
stockpiles stand at more than 80-year highs
above 458 million barrels. Crude oil commodity
continued its downward spiral for most part of
the week with the commodity moving lower for
the fifth week in a row as markets take negative
cues over US inventory and also comments from
OPEC members.
In major developments for the commodity
during the past week, US crude DoE oil stocks
increased nearly 3X markets forecasts inching
higher by 9.62 million barrels wherein the
cumulative reading moved to fresh 8 decade
high of 458.51 million. Stocks at Cushing,
Oklahoma i.e. the delivery point for WTI rose
by 2.865 million barrels. Total stocks at Cushing
now stood at 54.4 million barrels, its fresh
record. Cushing storage capacity as the EIA have
reached over 3/4th and make a highly bearish
case with markets expecting the storage
reaching full capacity by mid of 2015.
Market Highlights - Crude Oil (% change)
as on March 20, 2015
Crude Oil
Unit
Last Prev.
day
WoW
MoM
YoY
Brent (Spot)
$/bbl
54.5
1.7
-1.7
-7.2 -49.0
Nymex Crude
(Apr’ 15)
$/bbl
45.7
4.0
2.0
-7.5 -54.0
ICE Brent Crude
(Apr’15)
$/bbl
55.3
1.6
1.2
-8.1 -47.7
MCX Crude
(Apr ’15)
Rs/bbl
3080.0
7.6
1.4
-5.1 -49.2
Source: Angel Broking
Daily
News & Report
Analysis
India, world’s 3rd largest steel
producer overtaking US
India has overtaken the US to become the
third-largest steel producer in the world with a
production of 14.56 million tonne (MT) in first
two months of the year.
India has been the fourth-largest steel
producer for the past five years, behind China,
Japan and the US.
Data compiled by World Steel Association ( WSA)
showed that the country's production growth was
the highest during the January-February period at
7.6 per cent as compared to the global average of
just 0.6 per cent at 127.6 MT.
Production in China, which accounts for
nearly half of the global steel production, fell
during the period by 1.5 per cent. It produced
65 MT steel during the period.
Japan, the second-largest producer, reported
a total output of 17.4 MT, but production in the
country fell 2.2 per cent.
The US, which was the third-largest steel
producer since 2010, produced 13.52 MT during
the January-February period, giving away its
position to India.
On a yearly basis, India may retain the
position given the fact that a lot of capacities are
Monday 23, March 2015
set to be commissioned during the year from its
present installed manufacturing capacity of a
little over 100 MT.
Production in the US, on the other hand, is
heading for a stagnation with no signs of growth
in the immediate future.
Output in the US has been hovering between
86 MT and 88 MT for the last four years.
The gap of production between the two
countries was just 5 MT last year.
Interestingly, the US snatched the third slot
from India in 2009.
Odisha negotiating with
Center for allocating iron ore
mine to Posco
The state government said it is negotiating
with the Central government about granting
an iron ore lease to Posco, after the recently
introduced Mines Minerals Development and
Regulation (MMDR) Bill, 2015 was ratified by
the Parliament, doing away with the process of
preferential allotments of mining leases. "Posco
will have to take part in the auction process as
per the new law. But since we had committed to
the company that it will be provided an iron ore
lease to set up its steel plant, we are currently
negotiating with the Union government about
how the matter can be resolved without
violating the laws," said Prafulla Kumar Mallick,
state steel and mines minister.
"If Posco is denied the right of preferential
allotment, then it will affect international
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Daily
commitments of the country," he further added.
In the MMDR ordinance, there was a provision
to allot the mines on auction basis, like coal.
The ordinance, which was approved in both
the lower and upper houses of the Parliament
last week, was also backed by Biju Janata Dal
(BJD).Earlier, the BJD-ruled Odisha government
had warned to drag the matter to the courts,
if Centre did not heed to its concerns over the
provision in the new law allowing automatic
renewal of mining licence for captive and noncaptive leases till 2030 and 2020 respectively.
But later it made an about turn in its stance
and supported the Bill in the Parliament. Experts
said, since the BJD has backed the Bill in the
Parliament, the Centre might take a considerate
view on the demands of the state leading to
some workable solution on the pending issues
such Posco.
Goa mining may not start till
Oct: CM Parsekar
The environment
ministry may have
lifted the ban on iron
ore mining in Goa,
but the coastal state's
economic
"lifeline"
probably won't be
functional till October,
chief minister Laxmikant Parsekar stated.
"They (miners) are required to invest every
year before the beginning of the season, which
commences from September-October and
continues till May. As of now, we have reached
the fag end of March, they would get only 45
or 60 days. So probably that would not be
economical," Parsekar explained. Others who
may resume mining this season are those with
stretched resources, who have retained and
paid their staff, according to the chief minister.
Parsekar conceded that export duty
Monday 23, March 2015
for iron ore at 30 per cent was "steep" and
multiple clearances were needed, which
affect the sector, already struggling with poor
global demand.
Confirming that he had taken up the issue
with finance minister Arun Jaitley again after
the budget, Parsekar said he believed Jaitley is
wary about losing revenue from other states.
"He cannot make it (export duty exemption)
specific to Goa itself. He cannot afford to lose
such huge revenue (if exemption is made for
all states). But some miners will resume soon
for sure," said Parsekar.
He said clearances within the Goa
government's jurisdiction would be facilitated
quickly. "I believe they only need a certificate
clearance (NOC) from pollution control board,
which is of course at the state level, and I
would definitely help them in that regard if
they approach.
Miners warn new Mines Bill
will escalate mining cost
The cost of mining is set to go up with the
passage of the new mining bill that mandates
miners to pay more for project affected people,
according to industry officials.
Mines and Minerals (Development and
Regulation) Amendment Bill, 2015, provides for
the same amount of royalty payable by existing
lease holders in the District Mineral Fund (DMF)
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Daily
and one-third of the royalty for those who will
get mines after the enactment of the new law.
Provision for payment towards DMF was not
there in the 1957 Act of the same name which
would be replaced by the new Act. Thus, this is
an additional burden for the miners, who now
pay between Rs 8 and Rs 27 per tonne.
"As miners will have to pay towards DMF,
their production cost will go up which they will
obviously try to pass on to end-users and as a
result, common people will suffer," miners' body
FIMI's Secretary Gnereal R K Sharma said.
With the prevailing subdued global
commodity prices, the price of raw materials,
especially of iron ore, has fallen so much that
users might resort to more imports if the
domestic prices do not match and as a result,
mining activity can also hamper, an industry
sources said.
However, they were happy with the fact that
at least the new bill will bring in transparency in
the allocation of mines which was so far given
through the dispensation route.
At the same time they apprehend that
people with more money may hoard mines
at the expense of small and marginal players
leading to situation where only a wealthy few
will rule the roost.
Steel and Mines Minister Narendra Singh
Tomar however said that the new bill will bring
Monday 23, March 2015
a revolutionary change into the sector which
was plagued by different issues including ban
on mining.
JSPL upset over bid rejection
A day after government rejected bids
of JSPL and Balco amid speculation of
cartelisation, the steel maker said it is
"puzzled" with the decision while stating that
it followed a "consistent and prudent bidding
strategy" throughout coal block auctions.
"We had followed a consistent and prudent
bidding strategy throughout the coal block
auction process, with a serious long-term
business perspective. We are puzzled with the
decision and would make our best efforts to
engage in a dialogue with the Coal Ministry
and Government Authorities to present the
facts," it said in a statement.
The government had late last night
announced cancelling three bids -- two bids of
Jindal Steel and Power (JSPL) for three blocks
(Gare Palma IV/2, IV/3 and Tara) and one bid
by aluminium maker Balco for Gare Palma
IV/1 and said it would take a final decision on
these mines after deliberations.
According to sources, the government is
looking at options of giving the mines whose
bids have been cancelled to either Coal India
or states.
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