Karvy Comtrade’s Invest & Harvest · A Comprehensive English Monthly Magazine on Commodity Futures ... clients may lose their entire original investment. In no event should the

Invest & HarvestA Comprehensive English Monthly Magazine on Commodity Futures

Karvy Comtrade’s

Volume 10 Issue 01 Hyderabad February 2017 Pages 36 `25/-

Union Budget 2017

A Balanced Approach

Measures announced by the finance minister for financial sector

1. The commodities and securities deriva-tive markets will be further integrated by integrating the participants, brokers, and operational frameworks.

2. The process of registration of finan-cial market intermediaries like mutual funds, brokers, portfolio managers, etc. will be made fully online by SEBI. This will improve ease of doing business.

3. Steps will be taken for linking of individ-ual demat accounts with Aadhar.

February 2016 Karvy Comtrade’s Invest & Harvest 2

Cover Story

Budget: Balanced Approach 8

DisclaimerThe technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The report contains the opinions of the author(s) that are not to be construed as invest-ment advice. The author, directors and other employees of Karvy, and its affiliates, cannot be held responsible for the accuracy of the information presented herein or for results of the posi-tions taken based on the opinions expressed within. The opinions are based on the information believed to be accurate, and no assurance can be given for the accuracy of this information. There is risk of loss in trading in derivatives. The author, directors and other employees of Karvy and its affiliates cannot be held responsible for any losses in trading.Commodity derivatives trading involves substantial risk. The valuation of the underlying may fluctuate, and as a result, clients may lose their entire original investment. In no event should the content of this research report be construed as an express or an implied promise, guarantee or implication by, or from, Karvy Comtrade that you will profit or that losses can, or will be, limited in any manner whatsoever. The past results are no indication of future performance. The information provided in this report is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. We do not offer any sort of portfolio advisory, portfolio management, or investment advisory services.

Special Feature

India’s International Trade in the era of GST 10

Features & Updates

Rising copper imports pose biggest challenge for domestic industry 12

Rabi Update: Expectations of Bumper Crop Harvest 14

Recent Trends in Spices Market of India 18

contents

Zinc: An Investor’s Favorite 21


editorial

Editor Sushil Sinha

Executive EditorVeeresh Hiremath

Research Team Anup BP

Dilip Kumar Nath Himanshu Gupta Priya Chaudhary

Raj Nawab Singh KashyapRavi Shankar Pandey

Smita Zabiullah KhanRonak Bhavsar

Production Vijayendra Kumar Ch.

Pavan Kumar Narsingh Tahkur

Distribution Shabna R. Iyer

Printed & Published by: Sushil Kumar Sinha

on behalf of Karvy Consultants Limited.

Karvy House, 46 Avenue 4, Street No-1, Banjara Hills

Hyderabad-500034. AP.

Printed at: Harshitha Printers

6-2-985, Yousuf Building Adj. Railway Gate,

Khairatabad, Hyderabad-500004

Editor: Sushil Sinha

dear readers,Indian government took another bold step by advancing the presentation of General Budget by a month and the present for the year 2017-18 was presented by the Finance Minister on 1st February 2017. Another important factor of the budget was merger of Railway Budget with the General Budget. India was following presentation of a separate railway budget since colonial times. The budget looks a balanced one ahead of elections in five states. The budget was presented with an agenda of Transform, Energize and Clean India. Major thrust was given to agriculture sector in order to attain self sufficiency in production of food items as well as increasing farmers’ income through assured market. For the financial sector, some of the announcements were easing the registration process for institutional participants, linking of individual trading accounts with aadhar. For the commodity derivatives market, the FM proposed to set an expert committee to study and promote creation of an operational and legal framework for integrating eNAM with commodity derivatives market.

With the passage of GST bill in both Lok Sabha as well as Rajya Sabha and concurrence received by majority of the states, the road is ready for implementation of GST in the country. GST will replace all the existing taxes levied by central government as well as state government. An effort has been made to analyze the impact of GST on India’s international trade.

The performance of Rabi sowing crops has been smooth in the month of January as the weather pattern during the month was most conducive for the crop growth. Besides, harvesting of early sown crop also commenced in late January and the same is expected to enhance in the February month. We are very much optimistic about Rabi crop size as the acreage under all rabi sown crops increased considerably following better monsoon, favourable weather condition, higher price for the produce as well as sharp hike in MSP. An article on Rabi update with throw light on sowing activities, crop progress as well as our preliminary crop estimates for the season.

Trading in spices has been attracting various stakeholders as the prices of few of spices are at historic high levels and few of them are trading at multi year low levels. An article on spices, a detailed analysis is carried to find out the recent developments in the spices market, market direction as well as challenges and opportunities for the sector.

Since beginning of CY 2017, Zinc has performed exceptionally well in terms of price wherein the prices surged by 15% on supply disruption owing to mine closure across the globe. A guest article on zinc market will throw light on the developments in the zinc market as well as outlook for 2017. In another guest article, CEO of Vedanta Limited shared his views on copper market.

Happy Reading!

Note: The data in all charts and tables have been sourced from Bloomberg, KCTL Research, unless otherwise indicated.

From the Editor’s Desk


22273237424752

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17

1000106011201180124013001360

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17

COMEX Gold (US$/oz) NYMEX Crude (US$/bbl)

Thomson Reuters Jefferies CRB Index

Rogers International Commodity Index

S&P GSCI Commodity Index

Major Global Commodity Index Performers Of The Month (MCX/NCDEX)

MCX Lead Price Movement (Rs/kg)

MCX ZInc Price Movement (Rs/kg)

NCDEX Cotton Seed Oil Cake Price (Rs/qntl)

1870195520402125221022952380

Feb-16 Apr-16 Jul-16 Sep-16 Nov-16 Jan-17

157164171178185192199


250275300325350375400


135140145150155160165

2-Jan 9-Jan 16-Jan 23-Jan 30-Jan

170175180185190195200


2090212221542186221822502282


statistics


Rupee Movement 10-year Bond Yield (%)

Inflation (%) Index of Industrial Production (%)

DoE Inventory Levels (January) Inventory level M/M change (%)

Crude oil 479012 -3.18

Gasoline 235450 -8.42

Distillate 27178 -2.54

Refinary Utilization (%) 92 4.31Note: DoE - Department of Energy; volumes in thousand barrel

LME Inventory Levels (January) Inventory level M/M change (%)

Nickel 382290 2.97Aluminium 2268875 2.85Copper 261325 -18.90Zinc 394450 -7.81Lead 189450 -2.82

Note: LME - London Metal Exchange; volumes in metric tonne

Exchange Rate TrendsJanuary 31, 2017

December 30, 2016

% Change 52 Week High

% Change from 52 Week High

52 Week Low

% Change from 52 Week Low

Indian Rupee 67.8650 67.9238 -0.09% 68.8625 -1.45% 66.0712 2.71%

Euro 1.0784 1.0517 2.54% 1.1616 -7.16% 1.0341 4.28%

Great Britain Pound 1.2570 1.2340 1.86% 1.5018 -16.30% 1.1841 6.16%

Japanese Yen 113.0000 116.9600 -3.39% 118.66 -4.77% 99.02 14.12%

Swiss Franc 0.9906 1.0190 -2.79% 1.0344 -4.23% 0.9444 4.89%

Canadian Dollar 1.3038 1.3441 -3.00% 1.4016 -6.98% 1.2461 4.63%

Australian Dollar 0.7570 0.7208 5.02% 0.7835 -3.38% 0.6984 8.39%

New Zealand Dollar 0.7325 0.6934 5.64% 0.7486 -2.15% 0.6545 11.92%

Danish Krone 6.8959 7.0682 -2.44% 7.189 -4.08% 6.4059 7.65%

Norwegian Krone 8.2530 8.6406 -4.49% 8.7608 -5.80% 7.9455 3.87%

Swedish Krona 8.7599 9.1061 -3.80% 9.4482 -7.28% 7.8937 10.97%note: all quotes are against the Us dollar.

6.156.456.757.057.357.657.95

Jan-15 Jul-15 Jan-16 Jul-16 Jan-17

61.0062.2563.5064.7566.0067.2568.50

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statistics


News DigestNickel market roiled by supply outlooks in Indone-sia, PhilippinesThe nickel market has been undergoing wild swings this year, pummeled by Indonesia’s move to relax an export ban but later buoyed by expectations of a supply decrease from the Philippines. Prior to the an-nouncement, prices had been falling. Nickel futures had lost 11% from mid-January through the end of the month following Indonesia’s decision to ease a nickel ore export ban instituted in 2014. Indonesia used to produce 30% of the world’s nickel. Philippine Presi-dent Rodrigo Duterte is tightening regulations for mine operations as he pledges improvements in en-vironmental protection. Last summer, the Philippine government also ordered several mines to halt produc-tion. Source- asia.nikkei.com

Government to engage pulses management compa-nies for buffer stock The government has approved engaging professional pulses buffer management entity for efficient manage-ment of the buffer stock. Currently the Food Corpora-tion of India, Nafed and Small Farmers Agriculture Business Consortium were procuring pulses for the buffer stock. As on February 02, around 9.71 lakh tonnes of pulses have been procured and contracted for imports towards building the buffer. The govern-ment has set a target to build a buffer stock of 20 lakh tonnes to ensure prices of pulses remain stable. Pulses prices have not increased during the last two months of the current fiscal. No state has asked for one lakh tonnes of pulses from the buffer individually. Howev-er, based on the demand received from the states and union territories, as on February 01, around 50,958.01 tonnes of pulses has been allocated to the states and union territories, of which they have paid for around 37,533.549 tonnes and lifted around 35,454.124 tonnes. Source: The Economic Times

Bumper turmeric output from Andhra Pradesh, Maharashtra may heal losses Bumper turmeric crop in Andhra Pradesh, Telangana and Maharashtra is expected to offset the possible re-duced output from Tamil Nadu and Karnataka due to inadequate rainfall as harvest is set to start from Janu-ary. Andhra Pradesh and Tamil Nadu account for a major share of the 6 lakh tonnes of turmeric output in the country. Higher output in the two states and from non-traditional areas like Odisha may push down pric-es by 30%. Lower prices may help boost exports as

prices will be competitive. Andhra Pradesh and Tamil Nadu account for a major share of the 6 lakh tonnes of turmeric output in the country. Higher output in the two states and from non-traditional areas like Odisha may push down prices by 30%. Lower prices may help boost exports as prices will be competitive. Source: The Economic Times

India’s wheat imports rise above 5 million tonne, biggest in decadeIndia has bought more than five million tonnes of wheat since mid 2016, already its biggest annual pur-chase in a decade, after it began an import campaign to meet a supply shortfall left by two years of lower pro-duction. The country is slowing down imports ahead of the harvest in April and purchases in the months ahead will depend on production this year. There will be more deals signed in the coming months. It will not be more than 200,000 to 300,000 tonnes as the domes-tic harvest is expected to replenish supplies. The data showed 5.1 million tonnes of wheat has been delivered or loaded for arrival into India since July 1, while trad-ers estimated the country has bought about 5.2 million tonnes. More than one million tonnes of wheat was delivered to India in January and February arrivals have already hit close to 400,000 tonnes. The country began importing wheat around the middle of last year after two years of dry weather and unseasonal rains hit production in the world’s second largest consumer of the grain. The country has bought wheat mainly from Ukraine and Australia. Indian flour mills paid about $210-$212 a tonne, including cost and freight (C&F), for Ukrainian wheat. For Australian Standard Wheat (ASW), millers paid $215-$220 a tonne and Australian Premium Wheat (APW) was delivered to the coun-try at about $235-$240 a tonne. Winter wheat plant-ing in India this year was up about 7% at 31.78 mil-lion hectares as of Friday, government data showed. Source: The Economic Times


News Digest2016 cotton production up by 1%; CAIThe Cotton Association of India (CAI) has put its De-cember estimate of cotton production for 2016-17 at 341 lakh bales, which is higher by 1% than the previ-ous year. However, the trade body expects lower arriv-als, claiming that farmers are holding the crop. CAI, which mainly represents cotton traders, has released its December estimate of the cotton crop for the 2016-17 season beginning from 1st October 2016. The CAI has placed the cotton crop for the 2016-17 season at 341 lakh bale. The current production estimate of CAI is slightly higher that the last year’s estimate of 337 lakh bales. Source- The Economic Times

CFTRI: 90% of spices consumed locallyAccording to the Central Food Technological Re-search Institute, Mysuru, about 5.8 million tonnes of spices are produced annually in India and 90% of which is consumed in India itself and the rest export-ed. India accounts for 48% of the global consumption. Demand for spices was on the rise owing to its mul-tifaceted application in food and its beneficial effects on health. India is one of the largest producers, con-sumer and exporter of spices and CFTRI contributed potentially for the technological developments with the global outreach, the CFTRI added. The two-day scientific meet aims to enable better understanding of problems, specific strategies and solutions pertaining

to the science and technological aspects on spices. (Source: The Hindu)

Industrial Commodities Prices to Surge in 2017: World BankThe World Bank is forecasting strong gains for indus-trial commodities such as energy and metals in 2017, due to tightening supply and strengthening demand. In its January 2017 Commodity Markets Outlook, the World Bank is holding steady its crude oil price fore-cast for the year at $55 per barrel, a 29 percent jump from 2016. The energy price forecast assumes mem-bers of the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers will par-tially comply with an agreement to limit production after a long period of unrestrained output. The Bank is raising its metals price forecast to an increase of 11 percent from the 4 percent rise anticipated in its Octo-ber outlook on further tightening of supply and strong demand from China and advanced economies.Source: The World Bank

What Trump did to gold, oil and other commodi-ties in JanuaryCommodities have generally gained since Donald Trump was elected president of the United States back in November, as his plans for infrastructure spending fueled a rally in industrial commodities such lead, pal-ladium and copper. Prices for those commodities saw sharp gains this month, but crude oil and other energy commodities suffered on the back of Trump’s promise to ease restrictions on drilling, which could lead to higher supplies in an already glutted market.Source: www.marketwatch.com


— - Zabi Ullah Khan and Veeresh Hiremath

Budget: Balanced Approach

India has stepped into another milestone of ad-vancing the presentation of General Budget by a month as well as merging of Railway Budget with General Budget. The NDA abolished the

practice of presenting a Railway Budget separately, which was started in British India. The Union Finance Minister presented a General Budget on 1st February 2017 amidst uproar from opposition participation, who demanded for postponement of Budget in view of up-coming election in the five states.

While presenting the budget, the FM highlighted the agenda of the government for the next year was “Trans-form, Energise and Clean India”. The budget was pre-sented on ten distinct themes namely farmers, rural population, your, poor & underprivileged, infrastruc-ture, financial sector, digital economy, public service, prudent fiscal management and tax administration.

The finance minister also justified the announcement made by honourable prime minister regarding demon-etization of high value currency and informed that it is going to have a long term benefit on the economy. He

also reiterated that the effect of demonetization will not carry for next year.

AgricultureAgriculture is the backbone of the Indian economy and while presenting a budget for 2016-17, the FM had focused on income security to the farmers to dou-ble their income in five years. Several measures were initiated to double the income such as hiking MSP for various crops, waiving interest on crop loan for few days, increasing expenditure on inputs. Agriculture credit was most important factor, which plays cru-cial role in deciding acreage under crop cultivation. Hence, the target for agricultural credit has been fixed at a record level of Rs. 10 lakh crores.

In order to ensure the crop protection for the farm-ers at the time of sowing against natural calamities, the budget coverage under Fasal Bima Yojana will be in-creased from 30% of the cropper area in 2016-17 to 40% in 2017-18 and 50% in 2018-19. Allocation for irrigation is also increased to ensure maximum utiliza-

cover story


tion of available water resources for crop cultivation. During post harvest phase, farmers are forced to sell

their produce in distress at the bottom price. In order to ensure better price for the farmers, the coverage of Na-tional Agricultural Market (eNAM) will be expanded from present 250 markets to 585 APMCs. Since the fruits and vegetables are highly perishable in nature, FM proposed to integrate farmers with agro processing units for better price realization and reduction in post harvest losses. Dairy sector also received a good chunk of fund allocation for infrastructure development.

National Agriculture Market enables large market base for the farmers to sell their produce. Since farm-ers are at liberty of selling their produce across India, eNAM platform will help them to access the market price in different market for his produce.

Since the eNAM is covering most of the physical markets spread across India and giving an opportunity for better price realization for the farmer, the finance minister proposed to integrate eNAM with commod-ity derivatives for better price discovery as well as in-creasing deliveries through an exchange. Hence, FM proposed for constituting of an expert committee to study and promote creation of an operational and le-gal framework to integrate spot and derivatives market for commodity trading. Once eNAM and commodity derivatives market is integrated, farmers’ participation is expected to increase in the commodity derivatives market.

Among the tax proposals, the FM made changes in the income tax rates like reducing rate of income tax to 5% from existing 10% for the income fall in the range of Rs. 2.5 to Rs. 5.0 lakhs per annum. The thrust of the finance minister on tax proposal was stimulating growth, relief to middle class, affordable housing, curb-ing black money, promoting digital economy, transpar-ency of political funding and simplification of tax ad-ministration.

Measures announced by the finance minister for financial sector1. The commodities and securities derivative markets

will be further integrated by integrating the partici-pants, brokers, and operational frameworks.

2. The process of registration of financial market in-termediaries like mutual funds, brokers, portfolio managers, etc. will be made fully online by SEBI. This will improve ease of doing business.

Sectoral Allocation

3. Steps will be taken for linking of individual demat accounts with Aadhar.

ConclusionThe budget for the year 2017-18 presented seems to be balanced one without any major announcements of new schemes. In the budget, the FM reiterated that the effect of the demonetization is short lived and the na-tion will benefit from it in the long run. More empha-sise was given to infrastructure, social services and rural development. In the agriculture, more focus was made towards increasing farmers income, protecting the crops against natural calamities as well as ensur-ing timely disbursal of agricultural credit. There are no major announcements made for the com-modity derivatives market except proposal for con-stituting an expert committee to study and promote creation of an operational and legal framework to integrate spot and derivatives market for commod-ity trading. The commodity derivative market is yet to introduce options trading, which was announced in the budget 2016-17. The regulator and exchanges are working on introduction of options and we may see options avaiable for trading shortly.

Please read the Disclaimer carefully on page 4

cover story


India plays a vital role in the international trade of goods and services. India has transformed by merchandise exporters to services sector exporter. Technological innovations, availability of trained

manpower in the services sector especially IT sector made the country to find its space in global services trade.

There are various taxes in terms of export tax, im-port duty, tariff etc., are application on exim trade of the country. The nation is moving to adopt One Nation One Tax regime by implementing Goods and Services Tax Act. The required amendments to the constitution were incorporated and almost all the state governments gave their nod for implementation of GST Act. In the regime of GST, an analysis of GST impact on Indian economy and international is made and presented here.

Impact of GST of Indian economic and Foreign Trade Goods and Services Tax is the biggest reform taken by the central government since 1991 when the country opened for LPG regime. The main purpose of the GST is to scrap all taxes applicable at various levels and make the trade flow smooth. State governments are having different rates for same kind of services, which is affecting the inter-

state transactions. Once the GST is implemented in the country, the immediate effect will be negative as the tax payers has to adjust to new tax regime and understand the working, which will affect the trade and industry. First year of GST is going to be a difficult year for all the tax payers, which is expected to slow down the growth of the economy. Due to implementation of GST, there are chances of revenue loss for the state government, which has to be borne by the central government. This is additional burden on the central government’s budget. However, the long term impact is going to be positive as the nation adopts “One Nation One Tax” regime.

Foreign trade under GST regime is a winning game for the importers and exporters. Destination based taxation is the supreme motto of the GST. Under GST, importers would be taxed same at rate as products produced and consumed with the jurisdiction while exporters would be taxed at zero rate and will be eligible to claim refund of input tax credit. With the implementation of GST, India is likely to become more competitive country in the global trade. Since the imports under GST would be fully taxed, the imports are going to be reduced thereby protecting the domestic players. The positive effect of GST on foreign trade could be seen in a long term rather than short term.

— Veeresh Hiremath

India’s International Trade in the era of GST

special featUre


Sectors benefitting from GSTGST is expected to have a both positive and negative impact on the economy. The sectors gaining from the GST are FMCG, Automobile, Cement, Electrical, Retail, Multiplexes and Logistics. The biggest beneficiary of the GST is FMCG sector as multiple indirect taxes levies differently in different states will be scrapped and single tax structure will be implemented. Warehouse rationalization and reduction in overall tax rates would generate a savings for the sector. With the reduced tax rate, the consumption rate of the FMCG goods will surge. Automobile sector is also one of the biggest beneficiaries of GST as the vehicle price will be reduced because of lower GST rate, which would boost the vehicle sales.

Late gainers list include Cement and Electrical and performance of these two sectors is dependent on the housing market as well as infrastructure projects. Since central government is making good of the revenue loss to the state governments, the infrastructure projects undertaken by central government are likely to be de-layed.

GST and Ease of Doing BusinessEase of doing business is one of the pioneering steps taken by the central government. Firms and industries are finding it difficult to operate and sustain in the current tax structure as it is eroding their profit margins. Hence, the GST with single tax structure would benefit the ease of doing business as the burden of various tax structures at various levels and in different states would cease to exist. Many firms are operating in various states and they have to comply by those states tax structure, which would be abolished with GST. Firms have to maintain a single tax record and the efficiency as well as profitability of the firms will increase. Role of GST in global supply chainIndia is one of the key players in the global trade of goods and services. As the GST is benefitting the domestic industries in terms of single tax and makes the Indian goods and services more competitive in international trade, the country is expected to emerge as strong competitor to other countries. With rich heritage, labour force, natural resources India is definitely having a huge potential to emerge as largest contributor in global trade.

Supply chain in any economy is mostly dependent on logistics and warehousing. Implementation of GST will be smoothening the interstate movement of goods and services, which will strengthen the logistical and warehousing services. Since the interstate movement of goods and services will be easier post GST imple-mentation, it will reduce the logistical and warehousing charges, which will be money saving tool for the stake-holders in the supply chain. This activity will make India a more competitive country in global market in terms of competitiveness.

Technological support for GSTIndia has emerged as the world’s leading technology service provider in the recent past. Indian technology services companies are catering to the global companies in terms providing state of the art technology. Some of the leading projects undertaken by the government is Aadhar card, which is a great success. Besides, all the taxing system under current regime is being done through online. The central government is emphasizing on Digital India and with younger citizens of the country, who are most tech-savvy, the central government will develop state of the art technology for GST. The central government has already initiated a process of developing a technology for implementation of GST.

Impact of demonetization on implementation of GST Demonetization cannot be linked with GST as the demonetization was done to check the black money and counterfeit currency. With an implementation of GST and demonetization of high value currency will smoothen the economic progress of the nation. As the country is adopting one nation one tax formula and required state of the art technology will be built all the payments are being online. Hence, demonetization will be having positive impact on implementation of GST.

Challenges of GSTDuring the first year of GST implementation, the exporters and manufactures are likely to face the challenges regarding GST working, method of tax payable and to adjust their books of accounts with new tax structure. This activity might reduce the operating efficiency of the exporters and importers. Once the exporters and manufactures understand and adopts the system then it will be smooth sailing.


special featUre


— Pramod Shinde

Rising copper imports pose biggest challenge for domestic industry

Vedanta group is one of the leading global diversified natural resources group in the world under the aegis of Vedanta Resources Plc. Vedanta Resources is a London Stock

Exchange listed, globally diversified natural resources company with interests in zinc, lead, silver, copper, iron ore, aluminium, power and oil & gas. It’s operations span a vast value chain of exploration, asset develop-ment, extraction, processing and value addition.

Vedanta Group always strive to deliver growth and long-term value while upholding sustainable develop-ment through its diversified portfolio of large, long-life and low-cost assets.

Among all business verticals, Vedanta copper busi-ness includes operations in India and Australia. Its copper business in India includes a custom smelter, a refinery, phosphoric acid plant, a sulphuric acid plant, copper rod plant and three captive power plants at Thoothukudi in southern India, a refinery and two cop-per rod plants at Silvassa in western India. In addition, the company owns the Mt. Lyell copper mine in Tas-mania, Australia.

Vedanta can contribute by ensuring the availability of the right quality of copper to the manufacturing sector. Currently, Vedanta not only serves over 800 small and medium enterprises (SMEs) in the downstream indus-try for the critical electrical sector, but is also the major supplier of copper to the country’s defense sector.

Its copper smelter in India recorded the highest ever production and the best-in-class operational efficien-cies during the year. The full year copper cathode pro-duction at Thoothukudi was a record at 362,000 tonne despite the 23 day planned maintenance shutdown in Q1 FY 2014-15. The 160 MW power plant at Tutico-rin continued to operate at high Plant Load Factors of 86%.

Mr Ramnath in an interview with Minerals & Met-als Reviewshared his futuristic outlook for the copper industry in 2017 considering the global and domestic copper demand-supply scenario and key demand driv-ers for copper consumption etc.

Excerpts:1. How do you perceive China’s economic impact to weigh on global copper prices in 2017?China being the largest copper consumer plays a very important role in commodity prices. The copper de-mand in China has been stable over the past few months and has been the main reason for price increase from the lows of 2016 . During H-1 of 2017, the various stimulus programs announced by Chinese government will continue to have a positive impact. There is a sen-timent in the market that copper prices should remain firm in the first half of the year. However, the impact on China’s economic growth as a result of change in US policies (under new President) and the steps taken by US Fed may decide the course of pricing during the later half.

“Domestic copper industry needs to be supported with duty exemption in import of refined copper products (es-pecially under various FTAs) which is posing a biggest challenge for the domestic industry”

-- P Ramnath, Chief Executive Officer, Vedanta Limited-Copper Business

featUre


2. Could you please provide your futuristic views on domestic copper market?If we disregard the temporary impact of demonetiza-tion , we expect the copper demand in India to be very healthy , in line with the GDP growth estimates. The various government programs under “Make in India” campaign like Smart City/ Affordable Housing/Elec-tricity for All would be supportive of good increase in copper consumption in India. There has been a marked shift in usage of renewable energy/electrical vehicles which is a big positive for growth in consumption.

3. How do you analyse the trends in the copper in-dustry, environmental norms, depleting ore grade and new tax policies jeopardizing copper project in the near future?All the above factors may have an impact on the capital intensity of new projects which is already showing an increasing trend. The viability of any new project needs to be viewed in light of the prevailing demand-supply balance for copper. We should see higher price levels for copper in future to support new mining projects.

4. What are the biggest challenges faced by domestic copper industry in India and it’s key demand driv-ers in 2017?Duty exemption in import of refined copper products (especially under various FTAs) pose the biggest chal-lenge for the industry. It is in contradiction to the vari-ous government initatives as it has opened the flood-gates for cheap imports into India and has shifted the manufacturing activity away from India. In addition to this, substitution of copper by aluminum, especially in power cables, and use of unauthorized secondary cop-per are some of the challenges facing copper Industry.

5 How do you see infrastructure spending with the active public-private participation helping to revive the demand for copper?Rise in infrastructure spending will surely increase copper demand as most of the copper is utilized in con-struction, power & transportation sectors. We see lot of renewed focus on increasing the infrastructure spend-ing which is good for copper consumption.

6.Could you please share your views on Indian rail-ways massive modernization plans and the govern-ment renewable energy mission. Will it boost signifi-

cantly the demand for copper?Railway modernization is long overdue and as more and more people shift to cities, we will see the need for mass rapid transportation system in the form of metro rails. As of now, approximately 2% of domestic cop-per available is consumed by Railways which in our view should double in times to come. In addition, the increase in economic activities as a result of upgrada-tion of infrastructure will have a significant impact. Re-newable energy sector consumes more than twice the amount of copper consumed in traditional non-renew-able energy sector. All these augurs very well for a rise in copper consumption in India.

7. What would be your suggestion towards copper recycling policy initiative in India?First and foremost, we need to put an immediate end to all the unauthorized and un-registered copper recyclers who are operating illegally and pose an environmental and safety problem.

Recycling of copper should be done in an organized and systematic manner. There could be a nodal agency who should be entrusted with the responsibility of col-lecting secondary copper and ensure that it is recycled in a safe manner.

8. Tell us more about Vedanta copper business strat-egy towards technological advancement, value add-ed product and any expansion plans overseas?We are committed to offer best in class products which can meet the changing requirements of our customers in India. We are on track to commission a new rod plant which should offer best quality rods to our customers. By Q-1/FY 18, we would have sufficient capacity to produce 100% value added product from our facility.

We do not have any plans to invest in overseas mar-ket as our strategy is to remain a custom copper smelter based out of India

9. Vedanta Copper’s strategy to stay ahead?At Sterlite Copper, our vision is to become world’s leading copper producer and offer best in class prod-ucts to our customers. Our constant endeavour has been to be the lowest cost producer, by maximizing our op-erational efficiencies and recovering the entire value from our raw material and by- products. We also want to become a benchmark for the highest environmental standards by leveraging innovative technology.


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The kharif 2016 was remembered on a cheer-ful note as the normal monsoon has resulted into rise in acreage as well as production of kharif grown crops. The same trend was car-

ried for the Rabi season as well as the late monsoon rains left sufficient moisture in the soil thereby making the sowing activities to pick up since beginning of the season. The Rabi sowing is completed and the crops are getting ready for harvesting. Total area brought under Rabi season cultivation increased compared to last year on favourable weather condition. A sudden exercise of demonetization of higher value notes was announced during early November and this announcement came when the rabi sowing was gearing up. The demonetiza-tion had created sort of dark cloud over the progress of sowing activities due to lack of cash. For the sowing activities, farmers need cash for buying seeds, prepar-ing land for the sowing and to buy fertilizers and pesti-cides along with wages to labour. However, the record

sowing of overall sowing of rabi crops shows that there was no major impact of cash crunch situation after de-monetization as expected aftermath of demonetization.

Winter Season RainfallCountry as a whole has received rainfall with surplus of 36% from LPA during the period from 1st Jan 2017 till 1st Feb 2017. Good rainfall was witnessed over North West India region with surplus of 100% from LPA. Heavy rainfall coupled with extreme cold conditions resulted in some damage to standing crops in the region. Further, higher rainfall was also registered in South Peninsula states where most of the states were suffering from drought due to failure of both South West and North East monsoon. Rainfall during the period under review was with a surplus of 59% of LPA. However, rainfall in Central India and East & North East India were deficit with number of -80% and -82% respectively.

— Anup B P

Rabi Update: Expectations of Bumper Crop Harvest

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RegionsPeriod: (1 Jan 2017 to 1 Feb 2017)

Actual (mm)

Normal (mm)

% Departure from LP

Country as a whole 27.1 19.9 36%

North West India 76.3 38.2 100%

Central India 1.7 8.3 -80%

South Peninsula 12.6 7.9 59%

East & Northeast India 4 22.4 -82%

Source: IMD

Rabi Sowing ProgressLet us look at the progress of Rabi sowing, which has almost ended their activities for the season.

As on 3rd Feb 2017, sowing area under all crops was at 645.12 lakh hectares, higher by 5.7% Y/Y. Area under wheat has increased to 317.81 lakh hectares in 2016-17 from 297.25 lakh hectares in 2015-16. It is also higher by 13.76 lakh hectares compared to normal area of 304.05 lakh hectares during the rabi sowing season. Rise in acreage is predominantly witnessed in the states of Madhya Pradesh, Uttar Pradesh, Maharashtra and Rajasthan. Similar trend is registered in the case of other rabi cereals such as maize and barley in the ongoing sowing season. For maize, sowing area was at 16.50 lakh hectares, up by 9.5% Y/Y and is higher by 0.88 lakh hectares compared to normal sowing area of 15.62 lakh hectares. Higher acreage in maize is attributed mainly to increase in area in the major growing states such as Bihar, Gujarat, Maharashtra and Telangana; however there is slight decrease in area in other major growing states of Andhra Pradesh and Karnataka. Similarly, another major rabi cereal, barley sowing area was at 8.16 lakh hectares, up by 7.5% Y/Y. However, area in jowar has reduced to 32.22 lakh hectares from last year’s acreage of 37.43 lakh hectares. Major decline in cultivation area is recorded under rice which was at 25.64 lakh hectares, which was lower by 11.7% Y/Y. Decrease in area in the major growing states of South Peninsula such as Tamil Nadu, Karnataka, Andhra Pradesh and Kerala was seen following the failure of North East monsoon. Overall area under coarse cereals was at 57.61 lakh hectares which is lower by 5.6% compared to last year area of 61.05 lakh hectares.

For pulses, record area was registered during the rabi sowing, thanks to higher prices fetched for the pulses in the last season and an increase in MSP. More farmers took up cultivation of chana due to lucrative prices it

achieved last year following low production. Acreage under gram, major rabi pulses was at 99.01 lakh hect-ares, up by 10.7% compared to last year’s area of 89.45 lakh hectares. Sharp gain in area in the major grow-ing states of Rajasthan, Madhya Pradesh, Maharashtra and Karnataka was witnessed under gram cultivation. Similar trend was seen in the area for other major rabi pulses such as urad and moong at 8.74 lakh hectares and 6.4 lakh hectares which is higher by 9% and 3.4% respectively. Masur or Lentil has recorded sharp gains in area at 16.65 lakh hectares which is higher by 21.3% compared to last year acreage of 13.73 lakh hectares.

Area under oilseeds cultivation has increased by 6.2% Y/Y to 84.34. Increase in area is registered in crops such as mustard seed, groundnut and linseed while decreased sharply for safflower, sunflower and sesamum. For rapeseed mustard, area was at 70.56 lakh hectares, up by 9.3% Y/Y. Higher area under mustard seed is reported in major growing states of Rajasthan and Madhya Pradesh due to favourable weather con-ditions and adequate soil moisture. Area for sunflower has decreased sharply to 1.69 lakh hectares, lower by 47% as area due to sharp decline in the state of Karna-taka, which declined to 1.05 lakh hecahas in 2016-17 from 2.33 lakh hectares planted a year ago due to unfa-vourable weather condition.

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CropArea Sown Covered Yr-on-yr

ChangeNormal

Rabi Area2015-16 2016-17

Wheat 297.25 317.81 6.9% 304.05

Rice 29.03 25.64 -11.7% 43.58

Jowar 37.43 32.22 -13.9% 38.27

Maize 15.07 16.5 9.5% 15.62

Barley 7.59 8.16 7.5% 6.87

Coarse Cereals 61.05 57.61 -5.6% 65.15

Gram 89.45 99.01 10.7% 88.37

Lentil 13.73 16.65 21.3% 14.79

Kulthi 4.24 3.78 -10.8% 2.25

Urad 8.02 8.74 9.0% 7.68

Moong 6.19 6.4 3.4% 9.21

Others 8.57 9.6 12.0% 3.68

Total Pulses 143.7 159.72 11.1% 140.68

Rapeseed & Mustard 64.53 70.56 9.3% 63.2

Groundnut 5.96 6.16 3.4% 8.46

Safflower 1.17 0.95 -18.8% 2.06

Sunflower 3.21 1.69 -47.4% 4.9

Sesamum 0.71 0.57 -19.7% 3.01

Linseed 2.93 3.84 31.1% 3.11

Others 0.91 0.58 -36.3% 0.17

Total Oilseeds 79.42 84.34 6.2% 84.91

All Crops 610.44 645.12 5.7% 638.37source: agriculture Ministry, Goi

Production Expectations of Major Rabi crops

Wheat: Farmers in India have planted a record area under wheat crop in the ongoing winter crop season, which is raising hopes of a bumper crop in 2016-17. The area under wheat crop has increased by 7% to 317.81 lakh hectares. The government has targeted wheat production at 96.5 million MT, which would be 3% higher Y/Y. KCTL is anticipating a wheat production would be in the range 94-98 million tons.

Maize: During the Rabi 2016-17, maize was cultivated in an area of 16.50 lakh hectares, which was higher by 9% Y/Y. The weather con-dition had been favourable in major producing states and yield is ex-pected to improve. Rabi maize production is expected to be in the range

of 7-9 million tons.

Chana: Chana is the largest pulses crop grown during Rabi season. During the Rabi 2016-17, total area brought under chana cultivation has increased by 10.7% Y/Y. The rise in acreage was mainly because of all time high price recorded in the last season as well as fa-vourable weather conditions. Besides, sharp hike in MSP for chana attracted farmers to go for chana cultivation. Our preliminary estimates show that India’s chana production is expected to be 8.0-8.4 million tons.

Rape Mustard Seed: Mustard seeds acreage increased by 9.3% Y/Y to 70.56 lakh hectares during the Rabi season 2016-17. Weather condition had been favourable across major produc-ing states and yield is expected to be good, hence, total mustard seeds pro-duction is expected to be around 6.5-6.8 million tons.

Jeera: The are under jeera cultivation witnessed a tad decline in the current season and total area brough under jeera cultivation stood at 2.78 lakh hectares, down by 5.76% Y/Y. How-ever, the production is expected to be higher compared to last year due to in-creased yield level because of favour-

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able weather condition. Besides, there were no reports of occurrence of pests and diseases during crop growth stage. KCTL is projecting India’s jeera production at 4.2-4.4 lakh tons.

Dhaniya: Dhaniya production is expected to remain more or less same that of last year or may be lower due to mixed trend in sowing area as well as on not so favorable weather conditions in January month. Area under dhaniya in Rajasthan, top grower is reported to be lower as farmers shifted towards other remunera-tive crops. However, area in Gujarat is reported sharply higher by 0.325 lakh hectares. Standing crop in Rajas-than and Madhya Pradesh is slightly damaged due to extreme cold conditions and rainfall in the month of

January thereby creating concerns of decline in yield levels. It is uncertain to estimate the crop size at this point of time.

Conclusion

The success of excellent kharif production is carried forwarded for the Rabi season as well as on excellent performance of the weather Besides, various types of sops announced by central government as well as re-spective state governments amid active participation of state agricultural departments, the area under cultiva-tion of various crops in the Rabi season increased con-siderably. With higher acreage and favourable weather condition, the production is expected to be higher, which would help in reducing the food inflation.


ANYA LAXMI - QUIZ SERIES 23

Q1: (a):- Commodity Market in India is regulated by SEBIQ2: (c):- Gold comes under the commodity derivative contract.Q3: (c):- National level exchange offers to trade more than one commodityQ4: Answer to be given by reader (contest)Q5: (d):- Unit of trading of NCDEX wheat is 10MT.Answer of Anya Lakshmi Series 22 Q. No. 1 – Answer A (Liquidate the position same day)

By - Priya Chaudhary

Answers

ContestAnswer of Q. No. 4 to be given by the readers. Please mail answer to [email protected] by mentioning “Anya Laxmi Quiz Series 22” in the subject along with your name and mobile no. One winner will be selected based on lottery system from the received correct nominations. KCTL Research is not eligible to participate in this contest.

1. Who regulates the commodity exchanges in India? a. SEBI b. FOMC c. MCX d. NCDEX 2. Which of the following can be the underlying for a commodity derivative contract? a. Interest Rate b. Euro-Indian Rupee c. Gold d. NIFTY

3. Which of the follaowing is not true about the national level exchanges? a. Offers online trading b. Recognised on permanent basis c. Offers single commodity for trading d. Volumes higher than regional exchanges

4. Members can opt to meet the security deposit requirement by way of ______. a. Cash b. Bank Guarantee c. Fixed Deposit Receipts d. All of the above 5. Unit of trading for Wheat at NCDEX is __________. a.1 MT b. 3 MT c. 1Kg d. 10 MT

Q.1

Q.2

Q.3

Q.4

Q.5

COMMODITIES BROKING

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India known as the spice land of the world as it produces wide range of spices. India is the only country, which produces almost all kind of spices in the world. At present, the production of differ-

ent spices in India is around 6.20 million tonnes val-ued approximately $7.5 billion and area under spices is around 3.2 million hectares. India is the largest pro-ducer, consumer and exporter of spices in the world and the country produces about 75 of the 109 varieties listed by ISO and accounts for half of the global trad-ing in spices. The country accounts for nearly 44% and 32% in terms of volume and value in the world spice trade. The demand of Indian spices is high in the global market due to their rich aroma, texture and taste. India has the largest domestic market for spices in the world. The major importers of Indian spices are the US, China, the UAE, Vietnam and Malaysia. The major spices ex-ported from India are pepper, chili, turmeric, coriander, cardamom and cumin.

ProductionSpices production in India is witnessing mixed trend in the last few years due to various factors such as climatic conditions, prices earned by producers and technology used. The spices sowing is getting affected mainly due to factors such as prices, unfavorable weather conditions during sowing period, pests and diseases and shifting to other crops etc.

Cardamom production in India during current sea-son (Aug-June) will be in the range of 13,000-15,000 tonnes, down by 40 percent as compared to 30,000 tonnes last year due to unfavorable weather condition in Kerala and Karnataka. Black pepper production in 2016-17 expected to around 50,000 tonnes, down by 30 percent as compared to 65,000 tonnes in last year due to limited rainfall in Karnataka and Kerala. Chilli Production expected to around 1,480,000 tonnes, up by 7 percent as compared to 1,389,000 tonnes last year due to area under the crop has increased in the major

— - Soumendra Khanra

Recent Trends in Spices Market of India

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producing states such as Andhra Pradesh, Telangana and Madhya Pradesh. Turmeric production during cur-rent season expected to increase as sowing area has in-

creased by 33%, 12% and 7% to 20,000 Ha, 45,630 Ha, and 16,780 Ha in Maharashtra, Telangana and Andhra Pradesh respectively.

Source: Spices Board of India and National Horticulture Boardw

ExportEven though the production trend is mixed for over-all spices, exports have been in the increasing trend reflecting the demand for Indian spices in the world. Indian spices export increased in the term of value and touched Rs.1,623,823 lakhs during 2015-16 com-pared to Rs.1,489,968 lakhs while volume declined to

8,43,255 tonnes as compared to 8,93,920 tonnes last year, registering an increase of 9% and 2% in terms of value in rupee and dollar respectively. This indicates that Indian spices are getting premium price over other producing countries. India holds a prominent posi-tion in the world spice trade with expected to touch Rs.2,043,015 lakhs ($3 billion) by 2016-17.

Source: Spices Board of India

ConsumptionThe spice market is directly influenced by the growing processed food industry. The rise in consumption of bakery products, confectionery products, and ready-to-eat food in the developed economies is driving the market for the spice. The recent trend of using natural flavor enhancer has also catalyzed the growth of the

spice market. In the year 2015-16, the domestic spice consumption is around 5,208,000 tonnes and has been increasing steadily. Growth in the cosmetics industry is also directly influencing the spice market. Due to the antioxidant and antibacterial properties of spice (i.e. black pepper), it is often included in skin care products.

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Challenges

Quality issueThese issues are mainly concerned with the safety of the people of consuming nations. The quality and safety is two important aspects for any items, which are consumed directly or indirectly. Some of the Indian spices exported to other nations were banned before due to quality issues. For example, few months ago, Sri Lanka and Bhutan had temporarily banned imports of dry chilli from India. This was because the presence of higher pesticide residues in some of the consignment they received from India. When these kinds of incidents happen, importers will look for other countries for an alternative and hence India might lose the business to the competing countries. However, the ban was recently removed and the Agricultural and Processed Food Products Export Development Authority (APEDA) has advised the exporters to follow strict guidelines to start exports.

SustainabilityIndian spices are generally costlier when compared to spices from other origin. However, the superior quality and the unique characteristics such as aroma, flavor, pungency makes Indian spices the most preferred in the global market. Sustaining these unique characteristics in the years to come is one of the major challenges due to erratic weather conditions, pest attacks and disease on plants, extensive use of pesticides etc.

Poor post-harvest handling Post harvest management of spices involves processing, sorting, grading, packaging and transportation etc. The quality of spices directly depends upon the post harvest operation. Injudicious harvest and inappropriate post harvest management may be potential threat for low quality.

Competition India is facing stiff competition from other producing countries such as Guatemala, Russia, Vietnam, and China for cardamom, coriander, pepper and chilli respectively. Most of the countries are focusing on export as they have limited domestic demand for the spices.

OpportunitiesThe Indian spices are attributes towards the fast

growing food industry across the world. The per capital consumption of spices has been increasing over the years on account of rising demand for spices along with the expansion of in spice mixes. India’s advantage over other producing countries are large genetic base, varied soil and climatic condition, skilled man power with traditional agricultural knowledge, new cropping techniques, advanced research and development in terms of applicability, delivery of taste and convenience, value added through latest processing techniques etc., make Indian spices competent among other competing countries. Organic farming of agriculture commodities is gearing up internationally and India has now a clear lead in organic spices such as pepper, cardamom, chilli etc. Demand for value added spices is fast growing, with suitable technology and infrastructure we can capture the world demand.

Conclusion Spice markets have been experiencing ups and downs since its inception, but with strengthening of the working our country has been able to bring a degree of stability to this market. It has been progressing in terms of technology, transparency and trading activity with the support of government initiative. Spices Board of India is setting up a number of programmes under the scheme of “export development and promotion” to support exporters to adopt high tech processing and to develop capabilities to meet the changing food safety standards in the importing countries. Apart from that more emphasize has been given to value addition in spices therefore create a new market for value added product such as spices oils and oleoresins. All these parameters are likely to boost the Indian spices markets in the coming years.


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Which commodity was the favourite of investors and traders in the year 2016? I think there will be an unequivocal re-sponse suggesting galvanising metal

i.e., zinc. The graph presented below proves the above statement. Zinc prices on the LME has increased al-most 65% in 2016 making it 2nd attractive metal and the best performing non ferrous metal on the globe, Iron Ore claiming the top notch with 80% increase in the prices over a year’s time.

Shutdown of Glencore’s mine by end of 2015, Chi-nese order of shutting down of 26 lead and zinc mines in Hunan province for environmental reasons in 2016, Ireland’s Lisheen and Australia’s Century mine shut down last year are the primary reasons for the rally in the zinc prices. The pertinent question remains why zinc industry should attract so much attention and what lies ahead in 2017. To answer the first part, one may like to consider some facts. Zinc is the fourth most used metal on the earth and thanks to its volume. Zinc in-dustry accounts for around $34billion, slightly lesser than double the size of silver ($18billion). Zinc is con-sidered by much as modern metal owing to the fact that zinc smelting and production technology largely emerged much later than other metals like copper, lead and iron. Nevertheless, ancient people would smelt

zinc rich copper ore to make brass, which found its usefulness in making weapons, ornaments and coins. In modern times, zinc is critical component to make alloys, finding their applications in hardware industry and in tin, nickel, silver alloys. The world’s first battery produced at the end of 18th century used zinc as anode and copper as cathode and today various batteries find zinc in them. However, as we all know almost 50% of the zinc consumption is attributed to galvanising indus-try, the zinc market remains in a supply deficit, with mine supply falling at a faster pace than refined pro-duction, demand is far from strong but it is showing descent growth at 0.6 percent.

— Nikhil Supekar

Zinc: An Investor’s Favorite

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World zinc supply and usage 2009-2018

'000 tonnes of Zn 2011 2012 2013 2014 2015 2016 2017 (E) 2018 (E)

Mine Production 12,585 12,901 13,060 13,522 13,465 12,291 13,354 14,427

Refined Metal Production 13,058 12,619 13,017 13,498 13,897 13,672 14,142 14,926

Refined Metal Consumption 12,726 12,387 13,170 13,745 13,745 14,293 14,595 14,893

Surplus / Deficit 332 232 -153 -247 152 -621 -454 33

Source: ILZSG

The five years price chart of zinc prices in USD per pound depict the picture how prices are almost direct-ly co-related to the global surplus and deficit. Hence, the theory alone will propagate that 2017 should see slight cooling down of the zinc prices, though only in terms of nominal prices, but should remain much above earlier years. However, it largely depends upon how quickly mine production gets adjusted to 13/13.5 million tons of zinc i.e. whooping 10% increase than 2016. Although there is an idle mine capacity that can be reactivated to alleviate the supply deficit, there are few signs of this occurring yet and even when it is an-nounced, it will take considerable time to gear up. So all in all, one may reject such a theoretical consider-ation based upon assumptions to activate investment and trade calls.

LME stocks are also supporting the bullish trend for zinc. Stocks are down by 10.2% so far in 2017 since mid-January. It should be clear from the below graph.

As a consequence of current market dynamics, galvanising metal can see more investors’ interest spurring further increase in price which in turn will encourage miners, especially those in China. Never-theless, this does not undermine the fact that zinc con-centrate will remain in deficit and concentrate stocks will remain at low level of 25 days and this would further obliterate smelter’s hopes to increase produc-tion further forcing consumers to drawdown stocks, which are already at the historically low levels. As per some reports such low levels of stock are expected to remain for the rest of the decade which makes case of zinc prices stronger. This fundamental structural shift in the market will provide support to the zinc. Undoubtedly, these are the difficult times for custom smelters and innovation in terms of strategic approach would play an important part for them. Lesser avail-ability of raw material and lesser TCs don’t offer

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much incentive to the custom smelters. As a conse-quence, Korea Zinc will reduce sales from its directly owned smelting operations by 50,000 mt in 2017. The company plans to sell almost 600kt of zinc, 425kt of lead and 2,116 tonnes of silver in 2017, down from 2016 levels of 650kt, 428kt and 2,424 tonnes respec-tively. The reduction in sales is directly due to low-er expected production at Onsan smelter. The move comes as global supply of zinc concentrates continues to be tight, treatment charges for zinc concentrate sit at $25-40 per tonne – from $135-150 a year back – and premiums for the metal remain resolutely low, creating difficult conditions for smelters.

For now, zinc prices are certainly under consolida-tion mode with recent strong gains and market looks under complete control of bulls. Zinc is trending higher; bouts of profit-taking and producer selling are bound to be seen and at times might dominate. However, the macro view is the fundamentals are strong and hence one can expect extended rallies. Apart from profit booking, market might turn nervous about fall out of Brexit, poor PMI data out of Chi-na and rising, albeit slow, LME inventory, however such nervousness could see selling momentarily. As it goes one should get a feel for how bullish underly-ing sentiment is by seeing how far this pullback goes and whether likely support areas hold. LME’s COTR

will throw lot of light on this. Traders have lifted their both longs and shorts position in recent time and there may be a room for either side to concede in the short term. Another indication is change in spreads. The C-3M spread was last at $6.75-4.75C, which is still around the same range suggesting nei-ther borrowing nor lending dominates. It essentially means further action from money managers on the LME might cause some volatility or a correction, may be a deeper correction in short term. On Feb 7, COTR showed shorts covering 1,991 lots while longs liquidated 188 lots. This is very interesting to note that short-covering is quite prevalent since al-most the middle of 2016 and since then there has also been long liquidation, however, bulls returned to the floor sometime in the middle of Jan 2017. This phenomenon assists to decipher recent assessment of firm grip of bulls after correction that took place in the last two months of 2016. There is a potential for the bulls to get more long positions. As they say technical analysis suggests zinc has ended its bear rally near $2,300 and loss of momentum only could attract profit-taking by longs. Zinc’s fundamentals are strong and, while suspended capacity remains idle, the deficit is likely to draw down stocks of con-centrates and refined metal. The main development in recent days is the pick-up in stock withdrawals.


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January International Commodity Price TrendsDecember

30, 2016January 31, 2017

% Change 52 Week High

% Change from 52 Week High

52 Week Low

% Change from 52 Week Low

LME Lead 3 Month ($/t) 2016.50 2371.00 17.6% 2576.50 -7.98% 1626.00 45.82%

LME Zinc 3 Month ($/t) 2576.00 2860.00 11.0% 2985.00 -4.19% 1640.50 74.34%

LME Nickel 3 Month ($/t) 10020.00 9955.00 -0.6% 12145.00 -18.03% 7550.00 31.85%

Comex Silver (S.oz) 15.99 17.54 9.7% 21.23 -17.35% 14.61 20.08%

LME Copper 3 Month ($/t) 5535.50 5991.00 8.2% 6045.50 -0.90% 4430.00 35.24%

Nymex Crude Oil (S/bbl) 53.72 52.81 -1.7% 55.24 -4.40% 26.05 102.73%

LME Aluminium 3 Month ($/t) 1693.00 1819.00 7.4% 1883.00 -3.40% 1475.00 23.32%

ICE Sugar (cents/lb) 19.51 20.45 4.8% 24.10 -15.15% 12.61 62.17%

Comex Gold (S/oz) 1151.70 1211.40 5.2% 1377.50 -12.06% 1124.30 7.75%

CBOT Soy Oil (cents/lb) 34.66 33.85 -2.3% 38.35 -11.73% 29.77 13.71%

ICE Coffee (cents/lb) 137.05 149.55 9.1% 179.55 -16.71% 113.40 31.88%

ICE Cotton (cents/lb) 70.65 74.94 6.1% 77.98 -3.90% 54.53 37.43%

LIFFE Sugar (S/t) 524.20 544.20 3.8% 619.00 -12.08% 367.20 48.20%

Nymex Natural Gas ($/mmbtu) 3.72 3.12 -16.3% 3.99 -21.96% 1.61 93.48%

CBOT Soybean (cents/bushel) 1004.00 1024.50 2.0% 1186.25 -13.64% 856.00 19.68%

CBOT Corn (cents/bushel) 352.00 359.75 2.2% 444.00 -18.98% 314.75 14.30%

CBOT CORN 352.00 359.75 2.2% 444.00 -18.98% 314.75 14.30%

CBOT Soy Meal ($/t) 316.60 334.60 5.7% 432.50 -22.64% 258.90 29.24%

CBOT Wheat (cents/bushel) 408.00 420.75 3.1% 524.00 -19.70% 386.75 8.79%

January Gainers and Losers (M/M%)MCX NCDEX

Rm Seed

Soy Oil

Wheat

Turmeric

Soybean

Jeera

Guar Seed

Guar Gum

Sugar

Maize

Dhaniya

Cotton Seed Oil Cake

Natural Gas

Mentha Oil

Nickel

Crude Oil

Gold

Cotton

Aluminum

Silver

Cardamom

Copper

Zinc

Lead

STATiSTicS


Economic Events In February 2017

source: Bloomberg ; ec: european Union; in: india; Us: United states; cH: china; Ge: Germany; UK: United Kingdom; Jn: Japan

Date Time Region Event Period Surv(A) Prior

02/01/17 14:30 EC Markit Eurozone Manufacturing PMI Jan F 55.1 55.1

02/01/17 18:45 US ADP Employment Change Jan 169.41k 153k

02/01/17 20:15 US Markit US Manufacturing PMI Jan F 54.93 55.1

02/02/17 00:30 US FOMC Rate Decision (Upper Bound) 1-Feb 0.75% 0.75%

02/02/17 00:30 US FOMC Rate Decision (Lower Bound) 1-Feb 0.50% 0.50%

02/02/17 15:30 EC PPI MoM Dec 0.46% 0.30%

02/02/17 19:00 US Nonfarm Productivity 4Q P 0.93% 3.10%

02/02/17 19:00 US Unit Labor Costs 4Q P 2.11% 0.70%

02/03/17 07:15 CH Caixin China PMI Mfg Jan 51.74 51.9

02/03/17 14:30 EC Markit Eurozone Services PMI Jan F 53.64 53.6

02/03/17 14:30 EC Markit Eurozone Composite PMI Jan F 54.22 54.3

02/03/17 19:00 US Change in Nonfarm Payrolls Jan 183.39k 156k

02/03/17 19:00 US Unemployment Rate Jan 4.68% 4.70%

02/03/17 19:00 US Average Hourly Earnings MoM Jan 0.28% 0.40%

02/06/17 07:15 CH Caixin China PMI Composite Jan -- 53.5

02/06/17 07:15 CH Caixin China PMI Services Jan -- 53.4

02/07/17 19:00 US Trade Balance Dec -$44.81b -$45.2b

02/07/17 20:30 US JOLTS Job Openings Dec 5565.57 5522

02/08/17 14:30 IN RBI Reverse Repo Rate 8-Feb 5.54% 5.75%

02/08/17 14:30 IN RBI Cash Reserve Ratio 8-Feb 4.00% 4.00%

02/10/17 17:30 IN Industrial Production YoY Dec 0.97% 5.70%

02/10/17 CH Trade Balance Jan $48.02b $40.82b

02/13/17 17:30 IN CPI YoY Jan 3.23% 3.41%

STATiSTicS


source: Bloomberg ; ec: european Union; in: india; Us: United states; cH: china; Ge: Germany; UK: United Kingdom; Jn: Japan

Date Time Region Event Period Surv(A) Prior

02/13/17-02/15/17 IN Trade Balance Jan -$9707.33m -$10369.3m

02/14/17 07:00 CH CPI YoY Jan 2.42% 2.10%

02/14/17 07:00 CH PPI YoY Jan 6.57% 5.50%

02/14/17 15:30 EC Industrial Production SA MoM Dec -- 1.50%

02/14/17 15:30 EC GDP SA QoQ 4Q P -- 0.50%

02/14/17 19:00 US PPI Final Demand MoM Jan 0.26% 0.30%

02/14/17 19:00 US PPI Final Demand YoY Jan 1.55% 1.60%

02/15/17 19:00 US CPI MoM Jan 0.25% 0.30%

02/15/17 19:00 US Real Avg Weekly Earnings YoY Jan -- 0.20%

02/15/17 19:45 US Industrial Production MoM Jan 0.00% 0.80%

02/16/17 02:30 US Net Long-term TIC Flows Dec -- $30.8b

02/16/17 02:30 US Total Net TIC Flows Dec -- $23.7b

02/16/17 18:00 EC ECB account of the monetary policy meeting

02/16/17 19:00 US Housing Starts MoM Jan -0.32% 11.30%

02/16/17 19:00 US Building Permits MoM Jan 0.30% -0.20%

02/22/17 15:30 EC CPI MoM Jan -- 0.50%

02/22/17 20:30 US Existing Home Sales MoM Jan 1.09% -2.80%

02/23/17 00:30 US FOMC Meeting Minutes 1-Feb -- --

02/24/17 20:30 US New Home Sales MoM Jan 7.59% -10.40%

02/27/17 20:30 US Pending Home Sales MoM Jan -- 1.60%

02/28/17 17:30 IN GDP Annual Estimate YoY 2017 -- 7.90%

02/28/17 19:00 US GDP Annualized QoQ 4Q S -- 1.90%

02/28/17 19:00 US Core PCE QoQ 4Q S -- 1.30%

statistics

Economic Events In February 2017 (Continued)


Cross Word On Commodities - 23

Fill this Cross Word and test your commodity knowledge

By - Madhura

Across

1. An agreement to trade between buyer & seller for a standardised contract (7)

15. An agri commodity which has seen deliveries at MCX particularly in Gujarat (6)

36. Buy order is also known as (4)

44. The central bank of United States of America (3)

51. An overseas exchange where agri commodities are traded (4)

64. Buying and selling are called (5)

71. A broker / member when takes position in its own account (4)

78. An international exchange known for energy trade (5)

Down

1. Regulator of commodity exchanges (4)

5. An edible oil symbol (3)

7. An online trading platform of KARVY Comtrade (10)

9. Spot and this when get added, it becomes futures price ( 11)

19. Unit of Gold at international level (5)

36. A commodity used widely in vehicles (4)

41. Every contract has got one cut off date (6)

Answers of Sunahare Pal Series 22

1 5 7 9

15 19

36 41

44

51

64

71

78

C A S T O R S M A R T T R A D E

R U S S I A A L E N

U T B N G O L D L E

D T I G O I R

E B A R R E L O N G V G

I E Y

B A R A B A N K I M U S T A R D

U N Y M E X A K Y C

L R O

L G U A R G U M L

I T A

S O Y B E A N M

SunAHArE PAl

Karvy Comtrade’s Invest & HarvestFebruary 2017

RNI No.APENG/2008/24815

Documents

Karvy Comtrade’s Invest & Harvest · A Comprehensive English Monthly Magazine on Commodity Futures ... clients may lose their entire original investment. In no event should the