M o n d ay 0 8 , J une 2 015 News & Report Analysis Currency Market Precious Metal Base Metal Energy Market Event Update ISSDA welcomes government’s decision to impose Anti-Dumping Duty on imports New ASTM Standard Provides Corrosion Protection for Steel Bars Tata Steel goes green for World Environment Day RINL saleable steel production up 24% in April-May 2015 Steel prices may stay under pressure in FY16: Moody's Daily Monday 08, June 2015 Asian stock markets extended losses on yield marked its best weekly performance in Monday after Chinese imports declined more two years and touched an eight-month high than expected. Besides US dollar currency after the jobs data. remained higher on Friday after upbeat U.S. China’s Exports in May fell 2.5 percent from employment data raised bets that the U.S. a year earlier and imports slid 17.6 percent, central bank would raise interest rates as early data released by the General Administration as September. China's exports fell less than of Customs on Monday showed. That left the expected last month, but imports tumbled at a country with a near record trade surplus of greater pace, stoking concerns over a slowdown $59.49 billion for the month. in the world's second largest economy and Analysts polled by Reuters had expected giving Beijing more reason to take further exports to fell 5.0 percent in May from a year stimulus steps. Last week, Wall Street major ago, following a surprising 6.4 percent fall in indexes ended with mixed note, and nearly flat April, and predicted imports would fall 10.7 for the week, while the U.S. benchmark Treasury percent, versus a 16.2 percent slide in April. 2 3 Monday 08, June 2015 Daily The dollar index moderated to 96.405 on Currency Market Monday having risen as high as 96.909 after the jobs data was released on Friday, but was still USD/INR - 05/06/15 63.75 63.79 63.83 63.87 63.91 63.95 63.99 64.03 above levels seen before the data was published. The dollar was also strong against the euro, as the single currency remained hostage to shifts in sentiment over Greece's debt travails. 17:00 16:00 15:00 14:00 13:00 12:00 11:00 10:00 9:00 As the global currency speculators increased bets against the yen, with net yen short positions rising to the largest level in four 0.3537 USD/INR Overnight VAR Forecast Previous months last week, data from the Commodities EUR German Indust Produc m/n 0.6% -0.5% and Futures Trading Commission showed. The EUR German Trade Balance 18.1B 19.3B Australian dollar was pressured against the U.S. Data releases today SOURCE : MECKLAI FINANCIAL dollar on Monday after surprisingly strong U.S. The dollar held firm near 13-year highs jobs data and last traded at $0.7612. Investors against the yen in Asia on Monday after much took Chinese trade data in their stride. better-than-expected U.S. employment data Precious Metal bolstered expectations for an interest rate hike by the Federal Reserve before the year-end. U.S. Gold ticked up on Monday after a three-day nonfarm payrolls jumped 280,000 last month, losing streak, but was still hovering near an 11- the largest gain since December, while payrolls week low as a strong U.S. jobs report boosted for March and April also were revised to show expectations for a U.S. interest rate hike in 32,000 more jobs were created than previously September. Spot gold inched up 0.2 percent reported, the U.S. Labor Department said. to $1,173.90 an ounce by 0307 GMT. The metal "The payrolls data is making the case for a had fallen to $1,162.35 on Friday, its lowest since strong dollar doubly sure... The markets could March 19, after data showed U.S. job growth even think that the Fed might raise rates even accelerated sharply in May and wages picked twice this year," said Masatoshi Omata, senior up. Nonfarm payrolls increased 280,000 last manager of market trading at Resona Bank. 6 mth LIBOR Major Currencies Today’s Crosses Spot Cash v/s INR 0.42 USD / INR - ATM Options (put/call) 0.15 Forward Rates v/s INR (Export/ Import) June July August November February May 64.01/ 02 63.99/ 00 64.29/ 29 64.68/ 68 65.07/ 08 66.21/ 21 67.33/ 33 68.48/ 48 - - - 0.41/0.41 0.63/0.63 0.80/0.81 1.22/1.26 1.54/1.62 1.81/1.96 EUR / USD USD / JPY(100) GBP / USD 1.1104 71.07/ 09 71.05/ 07 71.40/ 41 71.87/ 87 72.34/ 34 73.72/ 72 75.13/ 11 76.59/ 58 0.14 USD / CHF AUD / USD 125.42 51.03/ 04 51.01/ 02 51.27/ 28 51.61/ 61 51.94/ 94 52.93/ 94 53.97/ 97 55.03/ 04 0.71 GBP / USD 1.5265 97.71/ 73 97.68/ 70 98.14/ 15 98.71/ 71 99.28/ 28 100.97/ 97 102.66/ 65 104.42/ 41 -0.70 USD / CHF 0.9411 68.01/ 02 67.98/ 99 68.30/ 31 68.82/ 83 69.34/ 35 70.84/ 87 72.35/ 43 74.93/ 00 3.06 AUD / USD 0.7614 48.74/ 75 48.72/ 73 48.95/ 95 49.26/ 25 49.55/ 55 50.42/ 42 51.27/ 27 52.15/ 14 Source : Mecklai Financial Monday 08, June 2015 Daily Market Highlights - Gold (% change) Gold Unit Gold (Spot) Prev. day WoW MoM YoY 1171.3 -0.41 -1.5 -1.1 Rs/10 gms 26550.0 -0.75 -0.7 -1.1 -10.9 $/oz 1175.2 0.63 -1.1 -0.7 -6.1 Rs /10 gms 26555.0 -0.23 -0.5 -1.4 -0.3 Comex Gold nearly flat while total exports tripped by 2.5. China was at record highs, up by around 35% yoy, which is likely to cap the gains in the metal. $/oz Gold (Spot -Mumbai) MCX Gold (Aug’15) Last as on June 05, 2015 -5.8 Japan revised its first quarter’s GDP to 1%, up from the expectations of 0.7%, indicating economic recovery. Overall, we recommend buying Al, Lead and Nickel from lower levels Source: Angel Broking whereas expect Cu and Zinc to remain range month, the largest gain since December. bound for the day. The report, indicating signs of strong It should be noted that exports of Al from momentum in the U.S. economy, bolstered China was at record highs, up by around 35% expectations the Federal Reserve will begin yoy, which is likely to cap the gains in the metal. to raise rates in September and sent the dollar Japan revised its first quarter’s GDP to 1%, rallying to a 13-year peak against the yen. up from the expectations of 0.7%, indicating Higher U.S. rates could diminish demand for economic recovery. Overall, we recommend non-interest-paying bullion, while a stronger buying Al, Lead and Nickel from lower levels dollar makes gold more expensive for holders of whereas expect Cu and Zinc to remain range other currencies and reduces the metal's safe- bound for the day. haven appeal. Copper tripped further in the dark tunnel Gold ETF holdings are near their 2015 lows of the losses this week and ended up at $5937 and seem to be contributing to gold's gradual MT, down by around 1.3% from its previous decline since mid-May," said MKS Group trader week’s close. Fundamentally, the inventories James Gardiner. "Higher bond yields and a for the metal at LME have declined by 7025 MT, stronger dollar are also continuing to put while the cancelled warrants for the metal rose pressure on the metal." by 3500 MT or 3.26% from previous week. In Benchmark 10-year U.S. Treasury yields addition to this, the contango for the metal at posted their steepest weekly jump in nearly two LME has shifted a tad upwards to $10 MT, giving years on Friday after the jobs report. a positive cue for the metal. LME Nickel was Base Metal the best performer amongst the base metals sector last week, settling at $13175 Mt, up by Base Metal prices ended with mixed note around 4.4% from its previous week’s close. on a weekly basis as the trimming of the global Fundamentally, the contango for the metal at growth rate by IMF and OECD triggered concerns LME declined further from $32 to $30 MT, giving over economic health. Nickel, however was the a positive cue for the metal. star performer last week gaining around 4% as Zinc declined by 2.65% from its previous the rise in the cancelled warrants supported the week’s close and settled around $2130 MT, metal prices to remain in the positive territory. while lead tumbled down by around 2.49% and China’s trade data showed a slump in the settled at $1902 MT. Fundamentally, in case of imports by 17.6% with Copper imports being lead, the inventories at LME declined by 2775 4 Monday 08, June 2015 Daily MT while the cancelled warrants rose by around of the year. Russia, on the other hand is about 1700 MT. The contango for the metal at LME to buy less than 500,000 barrels crude from Iran. declined from $16.25 MT to $15 MT, giving a Chinese trade data cues put a negative effect on positive signs for the metal. industrial metal, virtual ray of hope aligns with Energy Market the fact that more stimulus would be added Market Highlights - Crude Oil (% change) over medium-term. as on June 05, 2015 Crude Oil Unit Last Prev. day WoW MoM YoY Brent (Spot) $/bbl 60.0 0.2 -4.2 -7.4 -45.4 Nymex Crude (July’ 15) $/bbl 59.0 -0.3 -2.1 0.0 -43.5 ICE Brent Crude (July’ 15) $/bbl 63.3 2.1 -2.4 -3.4 -41.6 MCX Crude (June ’15) Rs/bbl 3742.0 0.6 -2.3 -1.3 -38.7 News & Report Analysis ISSDA welcomes government’s decision to impose Anti-Dumping Duty on imports Source: Angel Broking Crude prices last week slumped significantly during the earlier half of the week as markets awaited the important OPEC’s 167 meeting which was held on 5th June, 2015. On Friday though as the OPEC didn’t stated any fresh negativity, we saw some good pullback in the commodity with WTI gaining 1.95% closing at $59.13/ barrel whereas Brent gained more than 2% closing at $63.31/ barrel for the July contract respectively. Looking over the major cues last week, N C Mathur, President - ISSDA crude prices went on ultra bearish side before ISSDA applauds government’s decision to the OPEC meeting. Daily losses on Wednesday impose Anti Dumping Duty on Hot Rolled (HR) and Thursday counted more than 5%. However, flat products of stainless steel Grade 304 with post OPEC meeting the prices on Friday gained all its variants. The government has imposed almost 2% as the outcome from the meeting Anti Dumping Duty on all HR flat products of were in line with the expectations. OPEC stainless steel of Grade 304 originating from members decided maintaining their current China at US$309/MT, Malaysia at US$ 316/ 30MBPD levels for at least next 6 months, which MT and Korea at US$ 180/MT. “It’s a welcome may also go up if production and exports from move and a necessary one to save the domestic Libya, Iraq and Iran rises significantly. OPEC has industry which at the suffering end. This predicted an increase in demand of crude oil measure will definitely give some respite to the from the non- OECD countries in the second half industry”, said N. C Mathur, President - ISSDA. 5 Daily Monday 08, June 2015 The Ministry of Finance notification dated imports have threatened the huge investments 5th June, 2015 acknowledges the findings and resulted in underutilization of capacities. of the Directorate General of Anti-Dumping The surge in imports can be mainly attributed (DGAD) that HR 304 grade stainless steel flat to China. Many stainless steel players have products were being dumped from China, either approached BIFR (Board for Industrial Korea and Malaysia. DGAD has pointed in its and Financial Reconstruction) or are under CDR findings that the domestic industry has suffered mechanism. both material injury in volume and pricing as New ASTM Standard Provides Corrosion Protection for Steel Bars a result of dumping. ISSDA reinstates its stand that domestic stainless steel industry is well equipped to produce all HR 304 grade variants and imports were result of dumping by China, Korea and Malaysia. Apart from glut of imports from China, stainless steel industry is plagued with imports from countries like Malaysia, Korea and Japan under the Free Trade Agreement. Apart from this ISSDA has also written to the government on issue of abuse of India – Malaysia Comprehensive Economic Cooperation Agreement (CECA). In this case, Cold Rolled Stainless Steel Flat rolled products from Malaysia are being imported in India through preferential tariff benefit, thereby abusing the provision related to Rules of Origin by claiming the 35% value addition criteria. Since Malaysia does not have any Hot Rolling or melting capacities 35% value addition is not possible at cold rolling stage. In this context, ISSDA has also written to Ministry of International Trade and Industry, Malaysia to probe into the misuse of CECA. ISSDA reiterates its stand that significant dumping of Cold Rolled (CR) stainless steel flat products should also be noted by the government and Anti Dumping Duty on CR stainless steel flat products should be announced by the government at the earliest. It is important to note that domestic stainless steel industry has started showing signs of being a sick industry, as excessive A new ASTM International standard supports corrosion protection for steel reinforcing bars galvanized by zinc or zinc-alloy coatings for protection from corrosion. The standard (A1094/A1094M, Specification for Continuous Hot-Dip Galvanized Steel Bars for Concrete Reinforcement) provides a high-performance, low cost option for building and protecting concrete structures. ASTM member Gary Dallin is the director of the GalvInfo Center, a program of the International Zinc Association. Dallin notes that in addition to protection, the unique fabrication properties of the bars covered by the standard will help minimize installation and long-term maintenance costs. “Galvanizing is a proven and effective way to protect reinforcing bar from corrosion, as it provides both barrier and galvanic protection to the steel substrate,” says Dallin. “It also increases the chloride threshold of the reinforcing bar.” According to Dallin, the new standard will be useful to several entities: State and federal specifying bodies for bridge and road infrastructure; Engineering and contracting firms; Producers of precast concrete products; Manufacturers that will use the standard to 6 Monday 08, June 2015 Daily confirm that product parameters meet the theme for this month is resource efficiency and specification; and sustainable consumption and production. Tata Laboratories that will use it for product Steel organized a string of activities to celebrate World Environment Day, across its locations testing requirements. Corrosion and divisions to spread awareness about Organization, the worldwide cost of corrosion environment protection, sustenance and eco- is currently in the same order of magnitude conscious growth. “According to the World as the cost to produce and distribute food The celebrations for World Environment worldwide,” says Dallin. “This standard will make Day kicked off at the Shavak Nanavati Technical a positive impact in reducing these huge costs Institute, Jamshedpur with a tree plantation while improving the sustainability of global drive by Chief Guest for the occasion Mr TV infrastructure.” Narendran, MD, Tata Steel India & SEA and Tata Steel goes green for World Environment Day Guest of Honor, Mr Anand Sen, President, TQM Tata Steel is celebrating the month of June as ‘Tata Sustainability Month’, a Tata Group initiative under which various initiatives are being undertaken across the Tata Group. With the slogan ‘Conserve to Preserve’ Tata Steel’s & Steel Business, Tata Steel. The plantation drive was followed by an address to the gathering by Mr SK Singh, Chief, Capability Management, Tata Steel and Mr SK Pati, Chief, Environment Management, Tata Steel. Mr Shio Kumar Singh, Chief Capability Development, Tata Steel welcomed all the 7 Daily Monday 08, June 2015 invitees and shared his views on the subject. in crude steel and saleable steel were also the Mr Srikant Kumar Pati, Chief Environment highest in the months of April and May compared Management, Tata Steel briefed about various to previous years. VSP Chairman and Managing events lined up to celebrate World Environment Director P Madhusudan expressed confidence Day during the month of June. Mr Anand Sen, that the production would be ramped up President TQM & Steel Business, Tata Steel further with stabilisation of expansion units and rewarded all the winners of Online Environment efforts its RINL staff. Quiz Competition, EHS lead auditors and RINL registered a growth of 15 per cent in Environment article contest. Mr T V Narendran, its turnover till May, 2015. During the period, Managing Director, Tata Steel, India & South East exports grew threefold to Rs 395 crore against Asia rewarded all the children for winning the Rs 131 crore of corresponding period of last year Environment Poster competition. (CPLY). Sales volume also jumped by 49 per cent A pioneer in adopting Sustainability as a Policy, Tata Steel is guided by the approach that wealth created must be given back to the society. The responsibility of combining the three elements - social, environmental and economic – is of utmost importance to the way of life at Tata Steel. It is the combination of these three elements that ensures that business is sustainable for all stakeholders. during the first two months, it added. India's steel & power project in Afghanistan face hurdles State-run SAIL-led consortium's ambitious multi-billion dollar steel and power project in Afghanistan is believed to have hit a roadblock due to security as well as operational and economic feasibility concerns. While a top-ranking source in the Steel RINL saleable steel production up 24% in AprilMay 2015 Ministry said that the project has been put in "cold storage", SAIL Chairman C S Verma maintained that the project was still "officially on". Rashtriya Ispat Nigam Ltd said it has "The AFISCO project has been put in cold registered 24 per cent growth in saleable steel storage. There are several issues. First, it is production in the first two months of the current about the security of the personnel in that financial year. country. Then there is a question of economic Production of hot metal, liquid steel and captive power generation also recorded a growth of 10 per cent, 13 per cent and 24 per cent respectively, Visakhapatnam Steel Plant (VSP), said in a statement. RINL, the corporate entity of VSP, registered the best monthly performance since inception in May this year in areas of coke production and average power generation. The monthly production levels achieved 8 Monday 08, June 2015 Daily feasibility as it is difficult to operate there due to a continuous conflict hurting the basic infrastructure," the source said. For a project of this proportion, the investors need assurance from Afghan authorities on safety of the project, personnel and the infrastructure and all that is taking a lot of time, he added. The Afghan Iron and Steel Consortium (AFISCO), which won bids for three iron ore mines at Hajigak in war-torn Afghanistan in November 2011, planned to set up a 6.2 MTPA steel plant along with a 800 MW power plant, besides creating the necessary infrastructure. Later the plans were revised downward to reduce the vulnerability of the project. an estimated reserve of 1.28 billion tonne. The consortium has state-owned firms SAIL, RINL and NMDC holding a combined 56 per cent stake with the remaining held by JSW, JSPL and Monnet Ispat & Energy among others. Amar Sinha had also denied reports that the project was being scrapped. (Strengths, Weaknesses, Opportunities and Threats) analysis of the opportunities and strengths. No decision of this sort," he had tweeted following such reports. A senior Steel Ministry official said the Afghanistan government has passed the mining act, but India is waiting for more clarity on the policy front. administrative issues, regarding how to deal with the provisional government and clarity on the mining law. Another issue is corruption, which has led to several other foreign funded projects being stalled," he added. nearly 10 times the reserves of mines bid out so far to captive miners, for commercial mining. Setting up a platform where the miners will have to sell the coal is also being explored, sources in the government said. The blocks auctioned so far to private firms have reserves of up to 170 million tonne. Bigger blocks with about 700-900 million tonne capacity have been allotted to stateowned power companies, such as NTPC. explored blocks under the commercial mining category to attract Indian and foreign companies with good track records. Mines like Chendipada I & II with geographical reserves over 1,800 million tonne and Mahanadi-Machhakata with coalfields in Odisha can be considered for commercial use," a government official said. The Chendipada I and Chendipada II were separate "Not correct. Meeting only did a SWOT also big partially explored coal blocks in Odisha, with around 1,400 million tonne coal in the Talcher Earlier, India's Ambassador to Afghanistan are The government is considering auctioning "We are exploring putting up bigger and The three iron ore mines at Hajigak have "There Govt mulls auctioning of big partially explored coal blocks in Odisha blocks but were combined by the government before the auctions. Mahanadi and Machhakata were also two blocks, which were clubbed into one. These blocks have been categorised under ScheduleIII, meaning non-operational coal blocks for auction for captive use. 9 Daily Steel prices may stay under pressure in FY16: Moody's Steel prices in India are expected to remain under pressure in the current fiscal, but the demand is expected to pick up with an uptick in commercial vehicle sales, ratings agency Moody's said. Sounding upbeat on the performance of two major players in the domestic market -- Tata Steel and JSW Steel -- in 2015-16, it said that the worst phase for the two is over. "We do not foresee steel imports coming down anytime soon and so there may be pressure on the prices in 2015-16 fiscal, but the worse for Tata Steel and JSW Steel is over," Moody's Senior Analyst Kaustubh Chaubal said. Subdued domestic demand and rise in imports from China, Russia and Korea had Monday 08, June 2015 10 exerted pressure on steel realisations in the last fiscal, he added. However, Moody's expects steel demand to pick up in 2015-16 on the back of an uptick in commercial vehicles sales, particularly the medium and heavy commercial vehicles (M&HCV). "We expect the uptick in activity in the M&HCV segment to continue and if you look at the light commercial vehicles' space, the degrowth is now coming down, which is also a good sign. LCV market may turn in the second half of this fiscal. These aspects will help steel demand," Chaubal said. Besides, declining prices of iron ore and cooking coal as well as the government's decision to resume mining will aid in reducing pressure on the companies, Moody's said.
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