smc global commodity outlook (annual)
DESCRIPTION
Commodity Outlook is a yearly newsletter released in the beginning of the year. This booklet contains the valuable contents like Chart Indicators, percentage return of various commodities during previous year along with the most importantly - the price outlook of commodities with their respective fundamentals factors that may affect price movement in the same year. The expected trading range of all commodities is mentioned including that of international commodities. It also includes the seasonal charts of various commodities, which will guide every investor to make their investments accordingly, seeing the projected percentage of gains. This report comprises of impact of various economic indicators like jobless claims etc. so that it will be easier for the investors to gauge the global economic condition in order to measure the further movement of commodity prices.TRANSCRIPT
®
6th Annual Commodities Research Magazine (For private circulation only)
C MMODITY
WHEAT
NATURAL GAS
CHANA
SUGAR
SILV
ER
ALUMIN
IUM
TURMERIC
CRUDE OIL
GOLD
CO
TTO
NREF. SOYAOIL
CHILLI
COR
IAN
DER
LEAD STEEL
MUSTARDIRON ORE
SOYABEAN
ZINCNICKEL
CARDAMOM
JEERA
O U T L O O K 2 0 1 4
PALM OIL
RESEARCH, ROOTED IN YOUR GROWTH
CASTOR
ime flies too fast. In 2009, it all started when this magazine “Commodity Annual
Outlook” was launched by the finest minds in research. This year in 2014, we are Tcelebrating the sixth anniversary of this magazine and it's your interest which once
again made the preparation of “Commodity Annual Outlook” successful in a continuous row,
year after year. This time we have done several additions and made efforts to share with you
the best possible information and research work.
It is well said, “Money always goes where it's well treated”. We witnessed capital outflow
from commodities and safe haven buying, while the inflow was more into riskier assets
which gave a lucrative return. Furthermore, returns from commodity markets have
disappointed over the past few years. The Thomson Reuters/Core Commodity CRB index
consisting of 19 commodities was down by more than 10% last year, the third year of losses.
The impact of weaker growth in the emerging market is being felt on the commodity prices,
particularly in the industrial metals. Sustainable growth in U.S economy amid some
recovery in major economies encouraged investors to rebalance their portfolio and put
more money into the riskier assets.
Back at home, some of the commodities decoupled with international trend on wild swings
in rupee, especially gold. The year gone by was action packed, when it comes to
commodities. Many government decisions had crucial impact on this market. Imposition of
commodity transaction tax on non-agro commodities and processed foods since July 1 took
a toll over the futures trading volumes on most commodity bourses. The turnover of the
commodity exchanges fell by 36% of their accumulative turnover in the first nine months of
this current financial year. Series of actions to curb gold import had shrunk the physical
trade in Indian market.
Going forward, tapering has begun, that means easy money that has flown to the rest of the
world will, in some form, go back to the U.S. The Chinese economic growth is slowing down,
but they will definitely stay on a growth path. The other emerging nations may maintain
their current pace of growth whereas euro zone will still be a concern. Chinese
government's policies to rebalance the economy may act as a brake. Taken as a whole, we
can't say that commodities super cycle has broken but yet it faced strong downside and a
consolidation in commodities is here to stay for 1-2 years. Extra supply in commodities,
especially industrial metals may keep commodities on the back foot. Supply surplus is an
evidence of investment projects that started 2-3 years ago when prices were higher.
To conclude, commodities prices are going nowhere in short run as market is missing fresh
and strong triggers. U.S bond-buying tapering has been almost discounted in the
commodities space. Demand from emerging nations is once again crucial and can impact
commodities in a big way. Don't close the eyes by not watching the currency movements;
sometimes it works like the game changer. Rupee may trade in the range of 55-68 per dollar
whereas some appreciation is expected in Dollar Index. Few years back, commodities were
motivated by the emerging market growth story, which included huge investments in
infrastructure.
Commodities on the whole are expected to stay weak in 2014 with gold to remain bearish
and weakness to continue in base metals. Energy counter may trade flat whereas there
should be a marginal gain in agro commodities. Weather related news will be the main
driver for agriculture supply. “Momentum and carry will be the winning strategy for various
asset classes”. Wild swings in some commodities can not be denied; hence frequent
churning of portfolio is advisable.
Jagannadham Thunuguntla Head-Research
Commodity Fundamental TeamVandana Bharti AVP Commodity ResearchSandeep Joon Sr. Research AnalystSubhranil Dey Sr. Research AnalystShivanand Upadhyay Content Editor (Hindi)
Support TeamKamla Devi Content EditorPramod Chhimwal Graphic DesignerSonia Bamba Research Executive
Corporate Office11 / 6B, Shanti Chamber, Pusa Road, New Delhi 110005.Tel: 91-11-30111000, Extn. 625, 642, 674Fax: 91-11-25754365
Printed and Published on behalf ofSMC Comtrade Ltd.11/6B, Shanti Chamber, Pusa Road, New Delhi-110005Website: www.smctradeonline.comInvestor Grievance : [email protected]
Printed at: S & S MARKETING102, Mahavirji Complex, LSC-3, Rishabh Vihar, Delhi - 110092 (India)Ph.: +91-11-43035012, 43035014Email: [email protected]
Disclaimer: SMC Global Securities Limited is proposing, subject to receipt of requisite approvals, market conditions and other considerations, a further public issue of its equity shares and has filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The DRHP is available on the website of the SEBI at www.sebi.gov.in and the website of the Book Running Lead Managers i.e. Tata Securities Limited at www.tatacapital.com and IL&FS Capital Advisors Limited at www.ilfscapital.com. Investors should note that investment in equity shares involves a high degree of risk. For details please refer to the DRHP and particularly the section titled Risk Factors in the Draft Red Herring Prospectus.
This report is for the personal information of the authorized recipient and doesn't construe to be any investment, legal or taxation advice to you. It is only for private circulation and use .The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. No action is solicited on the basis of the contents of the report. The report should not be reproduced or redistributed to any other person(s)in any form without prior written permission of the SMC. The contents of this material are general and are neither comprehensive nor inclusive. Neither SMC nor any of its affiliates, associates, representatives, directors or employees shall be responsible for any loss or damage that may arise to any person due to any action taken on the basis of this report. It does not constitute personal recommendations or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/s. All investments involve risk and past performance doesn't guarantee future results. The value of, and income from investments may vary because of the changes in the macro and micro factors given at a certain period of time. The person should use his/her own judgment while taking investment decisions. Please note that we and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance if this material;(a) from time to time, may have long or short positions in, and buy or sell the commodities thereof, mentioned here in or (b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodities discussed herein (c) may have any other potential conflict of interest with respect to any recommendation and related information and opinions. All disputes shall be subject to the exclusive jurisdiction of Delhi High court.
Page No.
1. Performance of 2013 & Events 4
2. Commodity performance 2013 5
3. Asset class comparison 2013 6
4. Span of price movement 7
5. Fundamental calls performance in 2013 8-9
6. Economic indicators 10-12
7. Flashback 2013 & Outlook 2014
i. Bullions 13-16
ii. Energy 17-20
iii. Base metals 21-26
iv. Spices 27-30
v. Oilseeds & edible oil 31-34
vi. Other commodities 35-38
(Vandana Bharti)
“Happy Investing in Commodities”
Content COMMODITY OUTLOOK 2014
ime flies too fast. In 2009, it all started when this magazine “Commodity Annual
Outlook” was launched by the finest minds in research. This year in 2014, we are Tcelebrating the sixth anniversary of this magazine and it's your interest which once
again made the preparation of “Commodity Annual Outlook” successful in a continuous row,
year after year. This time we have done several additions and made efforts to share with you
the best possible information and research work.
It is well said, “Money always goes where it's well treated”. We witnessed capital outflow
from commodities and safe haven buying, while the inflow was more into riskier assets
which gave a lucrative return. Furthermore, returns from commodity markets have
disappointed over the past few years. The Thomson Reuters/Core Commodity CRB index
consisting of 19 commodities was down by more than 10% last year, the third year of losses.
The impact of weaker growth in the emerging market is being felt on the commodity prices,
particularly in the industrial metals. Sustainable growth in U.S economy amid some
recovery in major economies encouraged investors to rebalance their portfolio and put
more money into the riskier assets.
Back at home, some of the commodities decoupled with international trend on wild swings
in rupee, especially gold. The year gone by was action packed, when it comes to
commodities. Many government decisions had crucial impact on this market. Imposition of
commodity transaction tax on non-agro commodities and processed foods since July 1 took
a toll over the futures trading volumes on most commodity bourses. The turnover of the
commodity exchanges fell by 36% of their accumulative turnover in the first nine months of
this current financial year. Series of actions to curb gold import had shrunk the physical
trade in Indian market.
Going forward, tapering has begun, that means easy money that has flown to the rest of the
world will, in some form, go back to the U.S. The Chinese economic growth is slowing down,
but they will definitely stay on a growth path. The other emerging nations may maintain
their current pace of growth whereas euro zone will still be a concern. Chinese
government's policies to rebalance the economy may act as a brake. Taken as a whole, we
can't say that commodities super cycle has broken but yet it faced strong downside and a
consolidation in commodities is here to stay for 1-2 years. Extra supply in commodities,
especially industrial metals may keep commodities on the back foot. Supply surplus is an
evidence of investment projects that started 2-3 years ago when prices were higher.
To conclude, commodities prices are going nowhere in short run as market is missing fresh
and strong triggers. U.S bond-buying tapering has been almost discounted in the
commodities space. Demand from emerging nations is once again crucial and can impact
commodities in a big way. Don't close the eyes by not watching the currency movements;
sometimes it works like the game changer. Rupee may trade in the range of 55-68 per dollar
whereas some appreciation is expected in Dollar Index. Few years back, commodities were
motivated by the emerging market growth story, which included huge investments in
infrastructure.
Commodities on the whole are expected to stay weak in 2014 with gold to remain bearish
and weakness to continue in base metals. Energy counter may trade flat whereas there
should be a marginal gain in agro commodities. Weather related news will be the main
driver for agriculture supply. “Momentum and carry will be the winning strategy for various
asset classes”. Wild swings in some commodities can not be denied; hence frequent
churning of portfolio is advisable.
Jagannadham Thunuguntla Head-Research
Commodity Fundamental TeamVandana Bharti AVP Commodity ResearchSandeep Joon Sr. Research AnalystSubhranil Dey Sr. Research AnalystShivanand Upadhyay Content Editor (Hindi)
Support TeamKamla Devi Content EditorPramod Chhimwal Graphic DesignerSonia Bamba Research Executive
Corporate Office11 / 6B, Shanti Chamber, Pusa Road, New Delhi 110005.Tel: 91-11-30111000, Extn. 625, 642, 674Fax: 91-11-25754365
Printed and Published on behalf ofSMC Comtrade Ltd.11/6B, Shanti Chamber, Pusa Road, New Delhi-110005Website: www.smctradeonline.comInvestor Grievance : [email protected]
Printed at: S & S MARKETING102, Mahavirji Complex, LSC-3, Rishabh Vihar, Delhi - 110092 (India)Ph.: +91-11-43035012, 43035014Email: [email protected]
Disclaimer: SMC Global Securities Limited is proposing, subject to receipt of requisite approvals, market conditions and other considerations, a further public issue of its equity shares and has filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The DRHP is available on the website of the SEBI at www.sebi.gov.in and the website of the Book Running Lead Managers i.e. Tata Securities Limited at www.tatacapital.com and IL&FS Capital Advisors Limited at www.ilfscapital.com. Investors should note that investment in equity shares involves a high degree of risk. For details please refer to the DRHP and particularly the section titled Risk Factors in the Draft Red Herring Prospectus.
This report is for the personal information of the authorized recipient and doesn't construe to be any investment, legal or taxation advice to you. It is only for private circulation and use .The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. No action is solicited on the basis of the contents of the report. The report should not be reproduced or redistributed to any other person(s)in any form without prior written permission of the SMC. The contents of this material are general and are neither comprehensive nor inclusive. Neither SMC nor any of its affiliates, associates, representatives, directors or employees shall be responsible for any loss or damage that may arise to any person due to any action taken on the basis of this report. It does not constitute personal recommendations or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/s. All investments involve risk and past performance doesn't guarantee future results. The value of, and income from investments may vary because of the changes in the macro and micro factors given at a certain period of time. The person should use his/her own judgment while taking investment decisions. Please note that we and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance if this material;(a) from time to time, may have long or short positions in, and buy or sell the commodities thereof, mentioned here in or (b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodities discussed herein (c) may have any other potential conflict of interest with respect to any recommendation and related information and opinions. All disputes shall be subject to the exclusive jurisdiction of Delhi High court.
Page No.
1. Performance of 2013 & Events 4
2. Commodity performance 2013 5
3. Asset class comparison 2013 6
4. Span of price movement 7
5. Fundamental calls performance in 2013 8-9
6. Economic indicators 10-12
7. Flashback 2013 & Outlook 2014
i. Bullions 13-16
ii. Energy 17-20
iii. Base metals 21-26
iv. Spices 27-30
v. Oilseeds & edible oil 31-34
vi. Other commodities 35-38
(Vandana Bharti)
“Happy Investing in Commodities”
Content COMMODITY OUTLOOK 2014
Performance & Events Commodity Performance
®
4
Performance of Calls Given In Our Annual Magazine Commodity Outlook 2013
Range
(Annual Magz. '13) Low* High*
2013 2013
Gold (COMEX) 1530-1950 1180.00 1696
Gold (MCX) 28000-35000 24830.00 35074
Silver(COMEX) 21-48 18.14 32.45
Silver(MCX) 51000-75000 38536.00 59974.00
Crude Oil (NYMEX) 75-105 85.90 112.20
Crude Oil (MCX) 4400-5800 4737.00 7785.00
Natural gas(NYMEX) 3.3-4.90 3.07 4.43
Natural gas (MCX) 160-270 176.20 276.80
Copper 370-520 366.40 512.70
Zinc 95-130 97.40 136.90
Lead 100-150 104.30 155.40
Nickel 800-1250 787.50 1004.50
Aluminium 100-130 99.10 133.50
Turmeric 5000-9000 4426.00 7248.00
Cummin 13500-18500 11895.00 14845.00
Chilli 5500-8000 4650.00 7666.00
Cardamom 800-1400 559.90 1082.70
Chana 3200-4800 2528.00 4127.00
Kapas 800-1200 874.00 1105.00
Wheat 1400-1800 1370.00 1688.00
Sugar 2800-3650 2680.00 3267.00
Soybean (NCDEX) 2900-4800 2838.00 4276.00
Soybean (CBOT) 1200-1800 1255.00 1630.00
RM Seed 3200-4600 3020.00 4290.00
Ref. Soy oil 620-800 628.00 760.80
CPO (MCX) 360-580 426.40 585.10
CPO (BMD) 2100-3100 2177.00 2688.00
* Up to 13 December 2013
World Interest Rates Of Key Central Banks At Present
COMMODITY OUTLOOK 2014
FOMC & ECB Meeting Schedule For 2014
Months 2014 FOMC Meeting ECB Meeting
January 28th and 29th 9th and 22nd
February - 6th and 19th
March 18th and 19th 6th and 19th
April 29th and 30th 3rd and 16th
May - 8th and 21st
June 17th and 18th 5th and 17th
July 29th and 30th 3rd and 17th
August - 7th
September 16th and 17th 4th and 18th
October 28th and 29th 2nd and 15th
November - 6th and 19th
December 16th and 17th 4th and 17th
Central Banks Country/Region Current Interest Rates Previous Rate Date of Change
Federal Reserve (FED) U.S 0.25% 1.00% 16-Dec-08
European Central Bank (ECB) Euro 0.25% 0.50% 7-Nov-13
Bank of England (BOE) England 0.50% 1.00% 5-Mar-09
Bank of Japan (BOJ) Japan 0.10% 0.10% 5-Oct-10
Reserve Bank of India (RBI) India 7.75% 7.50% 29-Oct-13
People Bank of China (PBOC) China 6.00% 6.31% 5-Jul-12
Reserve Bank of Australia (RBA) Australia 2.50% 2.75% 6-Aug-13
Brazil Central Bank (BACEN) Brazil 9.50% 9.00% 9-Oct-12
WGC Gold holdings(Top 10 Countries)
Sr. No. Country Tonnes % of Reserves
1 United States 8,133.50 71.70%
2 Germany 3,390.60 68.80%
3 Italy 2,451.80 67.10%
4 France 2,435.40 65.50%
5 China 1,054.10 1.30%
6 Switzerland 1,040.10 8.60%
7 Russia 1,015.10 8.30%
8 Japan 765.2 2.60%
9 Netherlands 612.5 54.20%
10 India 557.7 8.40%
®
5
Return of Agri Commodities From 1st Jan '13 Till 13th Dec '13
Source: Reuters & SMC Research
Return of Bullions, Metals And Energy From 2nd Jan '13 till 13th Dec'13
Source: Reuters & SMC Research
COMMODITY OUTLOOK 2014
-26.84
-27.26
-5.19
-36.84
-36.67
-24.03
4.08
19.51
36.36
56.16
-10.56
2.58
-15.46
-5.03
-6.61
6.82
-10.06
1.91
-19.43
-8.91
-60.00 -40.00 -20.00 0.00 20.00 40.00 60.00 80.00
COMEX
LME Spot
MCX
COMEX
LME Spot
MCX
NYMEX
MCX
NYMEX
MCX
LME
MCX
LME
MCX
LME
MCX
LME
MCX
LME
MCX
Gold
Silve
rCr
ude O
ilNa
tura
l Gas
Co
pper
Alum
iniu
mZi
ncLe
adNi
ckel
% Change
% Change
-42.47
-42.19
-25.13
-24.21
-16.07
-13.39
-13.16
-10.75
-8.70
-5.55
-4.13
-0.65
3.17
4.90
9.79
15.58
18.58
19.08
25.65
30.85
36.38
-50.00 -40.00 -30.00 -20.00 -10.00 0.00 10.00 20.00 30.00 40.00 50.00
Mentha oil (MCX)
Cardamom (MCX)
Turmeric (NCDEX)
Chana (NCDEX)
Sugar M 200 (NCDEX)
Mustard seed (NCDEX)
Jeera (NCDEX)
Maize (NCDEX)
Gur (NCDEX)
Soybean (CBOT)
Kapas (NCDEX)
Refined soy oil (NCDEX)
Cotton oil seed cake (NCDEX)
Wheat (NCDEX)
Crude palm oil (BMD)
Chilli (NCDEX)
Soybean (NCDEX)
Soyameal (NCDEX)
Crude palm oil (MCX)
Castor seed (NCDEX)
Corainder (NCDEX)
Performance & Events Commodity Performance
®
4
Performance of Calls Given In Our Annual Magazine Commodity Outlook 2013
Range
(Annual Magz. '13) Low* High*
2013 2013
Gold (COMEX) 1530-1950 1180.00 1696
Gold (MCX) 28000-35000 24830.00 35074
Silver(COMEX) 21-48 18.14 32.45
Silver(MCX) 51000-75000 38536.00 59974.00
Crude Oil (NYMEX) 75-105 85.90 112.20
Crude Oil (MCX) 4400-5800 4737.00 7785.00
Natural gas(NYMEX) 3.3-4.90 3.07 4.43
Natural gas (MCX) 160-270 176.20 276.80
Copper 370-520 366.40 512.70
Zinc 95-130 97.40 136.90
Lead 100-150 104.30 155.40
Nickel 800-1250 787.50 1004.50
Aluminium 100-130 99.10 133.50
Turmeric 5000-9000 4426.00 7248.00
Cummin 13500-18500 11895.00 14845.00
Chilli 5500-8000 4650.00 7666.00
Cardamom 800-1400 559.90 1082.70
Chana 3200-4800 2528.00 4127.00
Kapas 800-1200 874.00 1105.00
Wheat 1400-1800 1370.00 1688.00
Sugar 2800-3650 2680.00 3267.00
Soybean (NCDEX) 2900-4800 2838.00 4276.00
Soybean (CBOT) 1200-1800 1255.00 1630.00
RM Seed 3200-4600 3020.00 4290.00
Ref. Soy oil 620-800 628.00 760.80
CPO (MCX) 360-580 426.40 585.10
CPO (BMD) 2100-3100 2177.00 2688.00
* Up to 13 December 2013
World Interest Rates Of Key Central Banks At Present
COMMODITY OUTLOOK 2014
FOMC & ECB Meeting Schedule For 2014
Months 2014 FOMC Meeting ECB Meeting
January 28th and 29th 9th and 22nd
February - 6th and 19th
March 18th and 19th 6th and 19th
April 29th and 30th 3rd and 16th
May - 8th and 21st
June 17th and 18th 5th and 17th
July 29th and 30th 3rd and 17th
August - 7th
September 16th and 17th 4th and 18th
October 28th and 29th 2nd and 15th
November - 6th and 19th
December 16th and 17th 4th and 17th
Central Banks Country/Region Current Interest Rates Previous Rate Date of Change
Federal Reserve (FED) U.S 0.25% 1.00% 16-Dec-08
European Central Bank (ECB) Euro 0.25% 0.50% 7-Nov-13
Bank of England (BOE) England 0.50% 1.00% 5-Mar-09
Bank of Japan (BOJ) Japan 0.10% 0.10% 5-Oct-10
Reserve Bank of India (RBI) India 7.75% 7.50% 29-Oct-13
People Bank of China (PBOC) China 6.00% 6.31% 5-Jul-12
Reserve Bank of Australia (RBA) Australia 2.50% 2.75% 6-Aug-13
Brazil Central Bank (BACEN) Brazil 9.50% 9.00% 9-Oct-12
WGC Gold holdings(Top 10 Countries)
Sr. No. Country Tonnes % of Reserves
1 United States 8,133.50 71.70%
2 Germany 3,390.60 68.80%
3 Italy 2,451.80 67.10%
4 France 2,435.40 65.50%
5 China 1,054.10 1.30%
6 Switzerland 1,040.10 8.60%
7 Russia 1,015.10 8.30%
8 Japan 765.2 2.60%
9 Netherlands 612.5 54.20%
10 India 557.7 8.40%
®
5
Return of Agri Commodities From 1st Jan '13 Till 13th Dec '13
Source: Reuters & SMC Research
Return of Bullions, Metals And Energy From 2nd Jan '13 till 13th Dec'13
Source: Reuters & SMC Research
COMMODITY OUTLOOK 2014
-26.84
-27.26
-5.19
-36.84
-36.67
-24.03
4.08
19.51
36.36
56.16
-10.56
2.58
-15.46
-5.03
-6.61
6.82
-10.06
1.91
-19.43
-8.91
-60.00 -40.00 -20.00 0.00 20.00 40.00 60.00 80.00
COMEX
LME Spot
MCX
COMEX
LME Spot
MCX
NYMEX
MCX
NYMEX
MCX
LME
MCX
LME
MCX
LME
MCX
LME
MCX
LME
MCX
Gold
Silve
rCr
ude O
ilNa
tura
l Gas
Co
pper
Alum
iniu
mZi
ncLe
adNi
ckel
% Change
% Change
-42.47
-42.19
-25.13
-24.21
-16.07
-13.39
-13.16
-10.75
-8.70
-5.55
-4.13
-0.65
3.17
4.90
9.79
15.58
18.58
19.08
25.65
30.85
36.38
-50.00 -40.00 -30.00 -20.00 -10.00 0.00 10.00 20.00 30.00 40.00 50.00
Mentha oil (MCX)
Cardamom (MCX)
Turmeric (NCDEX)
Chana (NCDEX)
Sugar M 200 (NCDEX)
Mustard seed (NCDEX)
Jeera (NCDEX)
Maize (NCDEX)
Gur (NCDEX)
Soybean (CBOT)
Kapas (NCDEX)
Refined soy oil (NCDEX)
Cotton oil seed cake (NCDEX)
Wheat (NCDEX)
Crude palm oil (BMD)
Chilli (NCDEX)
Soybean (NCDEX)
Soyameal (NCDEX)
Crude palm oil (MCX)
Castor seed (NCDEX)
Corainder (NCDEX)
Span of Price Movement (Agro Commodities)
Span of Price Movement (Bullions, Metals & Energy)
COMMODITY EXCHANGE LIFE TIME HIGH LIFE TIME LOW 2013 HIGH* 2013 LOW*
Gold COMEX 1911.60 252.50 1696.00 1180.00
MCX 35074.00 5600.00 35074.00 24830.00
Silver COMEX 50.35 1.95 32.45 18.14
MCX 73600.00 7551.00 59974.00 38536.00
Crude Oil NYMEX 147.27 9.75 112.20 85.90
MCX 7785.00 1626.00 7785.00 4737.00
Natural Gas NYMEX 15.78 1.04 4.43 3.07
MCX 591.80 99.50 276.80 176.20
Copper MCX 466.20 117.60 512.70 366.40
Aluminium MCX 151.50 62.20 133.50 99.10
Zinc MCX 208.30 49.85 136.90 97.40
Lead MCX 154.40 40.50 155.40 104.30
Nickel MCX 1416.00 442.30 1004.50 787.50
Source: Reuters & SMC Research
COMMODITY EXCHANGE LIFE TIME HIGH LIFE TIME LOW 2013 HIGH* 2013 LOW*
SPICES
OTHER COMMODITIES
OILSEEDS
Turmeric NCDEX 16350.00 1666.00 7248.00 4426.00
Jeera NCDEX 17520.00 4877.40 14845.00 11895.00
Chilli NCDEX 10970.00 1698.00 7666.00 4650.00
Cardamom MCX 2097.00 206.10 1082.70 559.90
Chana NCDEX 4999.00 1331.00 4127.00 2528.00
Wheat NCDEX 1705.00 662.00 1688.00 1370.00
Mentha Oil MCX 2564.80 342.00 1585.00 816.30
Gur NCDEX 1348.00 361.40 1348.00 965.50
Sugar NCDEX 3672.00 1182.00 3267.00 2680.00
Kapas NCDEX 1262.00 398.90 1105.00 874.00
Crude Palm Oil MCX 632.20 154.20 585.10 426.40
Crude Palm Oil BMD 4483.00 430.00 2688.00 2177.00
Soybean NCDEX 5064.50 1104.50 4276.00 2838.00
Soybean CBOT 1794.75 401.50 1630.00 1255.00
RM Seed NCDEX 4538.00 1586.25 4290.00 3020.00
Ref. Soy Oil NCDEX 817.00 337.70 760.80 628.00
* Closing till 13 December 2013
* Closing till 13 December 2013 Source: Reuters & SMC Research
Asset Classes Comparison
It was an action packed year which started with some vital upturn in U.S and sluggish economic activities in most of the emerging nations accompanied by the flat performance of European countries with little upside. Government shutdown in U.S gave some restless time to financial market, which ended after couple of weeks. This was the 17th shutdown in the past 40 years, with the last one being in 1995-1996. Apart from shutdown, tapering was a big concern for the entire world, which gave strong triggers to the market. It was expected in the mid 2013 but happened in December.
In 2013, inflow of smart money was more in equities because many economic indicators signaled some recovery in major economies. While fixed income markets gave flat or even negative total returns as rising interest rates reduced the bond prices. Prices of equities and property in some markets have rebounded strongly. It was majorly due to lower interest rates and continued global stimulus measures. And thus, capital inflow was more in riskier assets like equities. U.S and other major equity exchanges of European Union outperformed Asian markets. Sluggish economic activities had a toll on most of the Asian markets, except, Japan which gave return of more than 40% as economy came into inflation after many years. Dow Jones gave more than 15% return whereas dollar index also closed in the positive territory. S&P 500 Index had its biggest yearly gain in a decade. Treasury and gold, which are friends of bad time, landed in the negative territory as safe haven buying faded on some economic recovery. In the times of crisis, treasury bonds and gold typically rise in value as a flight-to-quality instruments while risky assets like stocks sell off and vice a versa. Yellow metal gold plummeted more than 26% in 2013, had its first annual loss since 2000; as the Federal Reserve has started curbing its $85 billion in monthly bond buying. But silver was weaker than gold and saw a sharp decline of 36%.
Commodities indices have underperformed other financial markets on moderate decline in purchases of raw materials such as oil, metals and agricultural products. Nevertheless commodities saw V-shape recovery after recession but if we consider broader picture, however it is still far below from their all time high. The Dow Jones-UBS Commodity Index is down by more than 10% in 2013 falling for the third straight year since its launch in 1998.
Below average economic performance in the midst of smooth supply made base metals counter unappealing and in consequence we saw selling in the counters. Most of the base metals were stuck in structural surplus to a greater or lesser degree since 2007/08. It was one of the strongest-ever periods of supply growth amid average physical demand. LMEX was down by more than 10%. Even China was not in exception when it comes to slowdown in emerging nations.
Back at home, NIFTY was slightly positive. But dismal performance of Indian currency decoupled commodities many times in 2014 with international market. Overall, financial markets gave opportunities to both bulls and bears in the year gone by.
Span Of Price Movement
Asset Classes Performance from 2nd Jan'13 to 13th Dec'13
COMMODITY OUTLOOK 2014
®
6
% Change
Source: Reuters & SMC Research
COMMODITY OUTLOOK 2014
®
7
-36.84
-26.84
-20.79
-10.56
-10.13
-5.05
-3.63
-3.51
-2.71
1.28
3.65
4.08
4.28
7.23
8.25
8.84
13.61
15.96
18.03
18.33
21.77
36.36
42.88
234.81
-100.00 -50.00 0.00 50.00 100.00 150.00 200.00 250.00
Silver (COMEX)
Gold (COMEX)
Bovespa
Copper (LME)
LMEX
US Treasury
GSCI commodity index
Shanghai Composite**
Hang Sang
Dollar Index
Nifty*
Crude Oil (NYMEX)
Euro/USD
FTSE
DJ EuroStox
CAC
INR/USD*
DAX
Dow Jones
Japanese Yen/USD
S&P 500
Natural Gas (NYMEX)
Nikkei
Baltic Dry Index
* Closing as on 1st Jan 2013 ** Closing as on 4th Jan 2013
Span of Price Movement (Agro Commodities)
Span of Price Movement (Bullions, Metals & Energy)
COMMODITY EXCHANGE LIFE TIME HIGH LIFE TIME LOW 2013 HIGH* 2013 LOW*
Gold COMEX 1911.60 252.50 1696.00 1180.00
MCX 35074.00 5600.00 35074.00 24830.00
Silver COMEX 50.35 1.95 32.45 18.14
MCX 73600.00 7551.00 59974.00 38536.00
Crude Oil NYMEX 147.27 9.75 112.20 85.90
MCX 7785.00 1626.00 7785.00 4737.00
Natural Gas NYMEX 15.78 1.04 4.43 3.07
MCX 591.80 99.50 276.80 176.20
Copper MCX 466.20 117.60 512.70 366.40
Aluminium MCX 151.50 62.20 133.50 99.10
Zinc MCX 208.30 49.85 136.90 97.40
Lead MCX 154.40 40.50 155.40 104.30
Nickel MCX 1416.00 442.30 1004.50 787.50
Source: Reuters & SMC Research
COMMODITY EXCHANGE LIFE TIME HIGH LIFE TIME LOW 2013 HIGH* 2013 LOW*
SPICES
OTHER COMMODITIES
OILSEEDS
Turmeric NCDEX 16350.00 1666.00 7248.00 4426.00
Jeera NCDEX 17520.00 4877.40 14845.00 11895.00
Chilli NCDEX 10970.00 1698.00 7666.00 4650.00
Cardamom MCX 2097.00 206.10 1082.70 559.90
Chana NCDEX 4999.00 1331.00 4127.00 2528.00
Wheat NCDEX 1705.00 662.00 1688.00 1370.00
Mentha Oil MCX 2564.80 342.00 1585.00 816.30
Gur NCDEX 1348.00 361.40 1348.00 965.50
Sugar NCDEX 3672.00 1182.00 3267.00 2680.00
Kapas NCDEX 1262.00 398.90 1105.00 874.00
Crude Palm Oil MCX 632.20 154.20 585.10 426.40
Crude Palm Oil BMD 4483.00 430.00 2688.00 2177.00
Soybean NCDEX 5064.50 1104.50 4276.00 2838.00
Soybean CBOT 1794.75 401.50 1630.00 1255.00
RM Seed NCDEX 4538.00 1586.25 4290.00 3020.00
Ref. Soy Oil NCDEX 817.00 337.70 760.80 628.00
* Closing till 13 December 2013
* Closing till 13 December 2013 Source: Reuters & SMC Research
Asset Classes Comparison
It was an action packed year which started with some vital upturn in U.S and sluggish economic activities in most of the emerging nations accompanied by the flat performance of European countries with little upside. Government shutdown in U.S gave some restless time to financial market, which ended after couple of weeks. This was the 17th shutdown in the past 40 years, with the last one being in 1995-1996. Apart from shutdown, tapering was a big concern for the entire world, which gave strong triggers to the market. It was expected in the mid 2013 but happened in December.
In 2013, inflow of smart money was more in equities because many economic indicators signaled some recovery in major economies. While fixed income markets gave flat or even negative total returns as rising interest rates reduced the bond prices. Prices of equities and property in some markets have rebounded strongly. It was majorly due to lower interest rates and continued global stimulus measures. And thus, capital inflow was more in riskier assets like equities. U.S and other major equity exchanges of European Union outperformed Asian markets. Sluggish economic activities had a toll on most of the Asian markets, except, Japan which gave return of more than 40% as economy came into inflation after many years. Dow Jones gave more than 15% return whereas dollar index also closed in the positive territory. S&P 500 Index had its biggest yearly gain in a decade. Treasury and gold, which are friends of bad time, landed in the negative territory as safe haven buying faded on some economic recovery. In the times of crisis, treasury bonds and gold typically rise in value as a flight-to-quality instruments while risky assets like stocks sell off and vice a versa. Yellow metal gold plummeted more than 26% in 2013, had its first annual loss since 2000; as the Federal Reserve has started curbing its $85 billion in monthly bond buying. But silver was weaker than gold and saw a sharp decline of 36%.
Commodities indices have underperformed other financial markets on moderate decline in purchases of raw materials such as oil, metals and agricultural products. Nevertheless commodities saw V-shape recovery after recession but if we consider broader picture, however it is still far below from their all time high. The Dow Jones-UBS Commodity Index is down by more than 10% in 2013 falling for the third straight year since its launch in 1998.
Below average economic performance in the midst of smooth supply made base metals counter unappealing and in consequence we saw selling in the counters. Most of the base metals were stuck in structural surplus to a greater or lesser degree since 2007/08. It was one of the strongest-ever periods of supply growth amid average physical demand. LMEX was down by more than 10%. Even China was not in exception when it comes to slowdown in emerging nations.
Back at home, NIFTY was slightly positive. But dismal performance of Indian currency decoupled commodities many times in 2014 with international market. Overall, financial markets gave opportunities to both bulls and bears in the year gone by.
Span Of Price Movement
Asset Classes Performance from 2nd Jan'13 to 13th Dec'13
COMMODITY OUTLOOK 2014
®
6
% Change
Source: Reuters & SMC Research
COMMODITY OUTLOOK 2014
®
7
-36.84
-26.84
-20.79
-10.56
-10.13
-5.05
-3.63
-3.51
-2.71
1.28
3.65
4.08
4.28
7.23
8.25
8.84
13.61
15.96
18.03
18.33
21.77
36.36
42.88
234.81
-100.00 -50.00 0.00 50.00 100.00 150.00 200.00 250.00
Silver (COMEX)
Gold (COMEX)
Bovespa
Copper (LME)
LMEX
US Treasury
GSCI commodity index
Shanghai Composite**
Hang Sang
Dollar Index
Nifty*
Crude Oil (NYMEX)
Euro/USD
FTSE
DJ EuroStox
CAC
INR/USD*
DAX
Dow Jones
Japanese Yen/USD
S&P 500
Natural Gas (NYMEX)
Nikkei
Baltic Dry Index
* Closing as on 1st Jan 2013 ** Closing as on 4th Jan 2013
Performance of Fundamental Positional calls
Note: a) These fundamental calls are for duration of one to four weeks time frame and do not confuse with these with intraday calls.
Note: a) These fundamental calls are for duration of one to four weeks time frame and do not confuse with these with intraday calls.
Performance of Fundamental Positional callsCOMMODITY OUTLOOK 2014
®
8
COMMODITY OUTLOOK 2014
®
9
Per
form
ance
of
Agr
i C
omm
odit
ies
Fun
dam
enta
l P
osit
ion
al C
alls
(Ja
nu
ary
- D
ecem
ber
) 20
13
Agr
o A
nal
yst:
Su
bh
ran
il D
eyS
. N.
Dat
eC
om
mo
dit
yC
on
trac
tT
ren
d
Cal
l In
itia
ted
Tar
get
sS
top
Lo
ss c
losi
ng
R
emar
ks
Pri
ce m
ov
emen
t si
nce
Giv
en P
rice
b
elo
w/a
bo
ve
call
is
init
iate
d (
%)
129
-Jan
-13
Co
rian
der
Ap
ril
Sel
l7,
021.
006,
250.
007,
335.
00B
oo
ked
pro
fit
at 6
435.
009.
11
231
-Jan
-13
CP
OM
arB
uy
460.
0049
0.00
440.
00B
oo
ked
pro
fit
at 4
65.0
01.
09
318
-Feb
-13
Ch
illi
Ap
ril
Sel
l7,
150.
006,
470.
007,
470.
00B
oo
ked
pro
fit
at 6
618.
008.
7
426
-Feb
-13
Pep
per
Ap
ril
Sel
l35
,100
.00
32,3
25.0
036
,545
.00
Bo
ok
ed p
rofi
t at
342
70.0
02.
42
52-
Ap
r-13
Mu
star
dJu
ne
Bu
y3,
532.
003,
815.
003,
380.
00B
oo
ked
pro
fit
at 3
632.
00
2.83
616
-Ap
r-13
Co
cud
Jun
eS
ell
1,56
0.00
1,46
0.00
1,61
0.00
Tar
get
Met
at
1460
.00
7.07
725
-Ap
r-13
Mai
zeJu
ne
Bu
y1,
196.
001,
295.
001,
150.
00E
xit
at
1150
.00
-3.8
5
823
-May
-13
Jeer
aJu
lyB
uy
13,4
50.0
014
,525
.00
12,9
15.0
0B
oo
ked
pro
fit
at 1
3770
.00
2.38
918
-Ju
n-1
3K
apas
Ap
r'14
Sel
l1,
060.
001,
010.
001,
090.
00E
xit
at
1090
.00
-2.7
5
107-
Au
g-1
3K
apas
Ap
r'14
Bu
y99
2.00
1,05
0.00
960.
00T
arg
et m
et a
t 10
50.0
0 5.
34
1116
-Au
g-1
3C
han
aS
ept
Bu
y2,
900.
003,
125.
002,
770.
00B
oo
ked
pro
fit
at 3
088.
00
6.48
1220
-Au
g-1
3C
ocu
dD
ecB
uy
1,50
7.00
1,60
5.00
1,46
0.00
Sto
p l
oss
hit
-3.1
2
1323
-Au
g-1
3M
aize
Oct
Bu
y1,
268.
001,
340.
001,
225.
00B
oo
ked
pro
fit
at 1
340.
005.
44
1428
-Au
g-1
3G
uar
See
dO
ctB
uy
5,18
0.00
5,61
0.00
4,98
0.00
Tar
get
met
at
5610
.00
11.9
7
1515
-Oct
-13
CP
ON
ov
Bu
y52
1.00
540.
0051
0.00
Tar
get
met
at
540.
003.
65
1617
-Oct
-13
So
yb
ean
Dec
Sel
l3,
607.
503,
380.
003,
710.
00B
oo
ked
pro
fit
at 3
538.
00
1.96
1724
-Oct
-13
Mu
star
dD
ecB
uy
3,78
8.00
4,02
0.00
3,67
5.00
Bo
ok
ed p
rofi
t at
387
0.00
3.59
Sl.
No
.G
iven
Pri
ceca
ll I
s in
itia
ted
(%
)
Dat
eC
om
mo
dit
yC
on
trac
tT
ren
d
Cal
l In
itia
ted
T
arg
ets
Sto
p L
oss
Rem
ark
sP
rice
mo
vem
ent
sin
ce
17-
Jan
-13
Lea
dF
ebS
ell
128.
7012
0 an
d 1
1613
3B
oo
ked
pro
fit
at 1
23.0
04.
43
27-
Jan
-13
Zin
cF
ebS
ell
112.
8010
6 an
d 1
0411
5.50
Bo
ok
ed p
rofi
t at
108
.15
4.12
36-
Feb
-13
Nat
ura
l g
asM
arch
Bu
y18
5.00
197
and
205
178.
00S
top
lo
ss h
it-3
.78
421
-Feb
-13
Cru
de
oil
Mar
chS
ell
5165
.00
4900
an
d 4
800
5280
.00
Bo
ok
ed p
rofi
t at
495
0.00
4.16
55-
Mar
-13
Sil
ver
May
Bu
y
5480
0.00
5900
0 an
d 6
0000
5290
0.00
Sto
p l
oss
hit
-3.4
7
613
-Mar
-13
Lea
dA
pri
lB
uy
122.
0012
811
8.00
Ex
it a
t 11
9.80
-1.8
0
713
-Mar
-13
Zin
cA
pri
lB
uy
108.
0011
510
5.50
Ex
it a
t 10
6.50
-1.3
9
82-
Ap
r-13
Nat
ura
l g
asM
ayS
ell
223.
0020
2 an
d 1
9823
2.00
Sto
p l
oss
hit
-4.0
4
930
-Ap
r-13
Go
ldJu
ne
Sel
l27
025.
0025
600
and
254
0027
800.
00B
oth
tar
get
met
6.01
1030
-Ap
r-13
Sil
ver
July
Sel
l45
725.
0040
000
and
380
0048
000.
00B
oo
ked
pro
fit
at 4
0800
.00
10.7
7
1114
-May
-13
Cru
de
oil
Jun
eS
ell
5235
.00
5000
an
d 4
950
5340
.00
Bo
ok
ed p
rofi
t at
510
0.00
2.58
1222
-May
-13
Lea
dJu
ne
Bu
y11
3.50
126
and
128
108.
00B
oth
tar
get
met
12.7
8
1322
-May
-13
Zin
cJu
ne
Bu
y10
2.60
110
and
114
100.
00B
oth
tar
get
met
10.0
0
144-
Jun
-13
Nic
kel
July
Bu
y86
5.00
940
and
960
835.
00S
top
lo
ss h
it-3
.59
151-
Jul-
13G
old
Oct
Bu
y25
730.
0027
000
and
275
0025
300.
00B
oo
ked
pro
fit
at 2
6471
.00
2.88
161-
Jul-
13S
ilv
erS
epB
uy
4050
0.00
4400
039
100.
00B
oo
ked
pro
fit
at 4
1680
.00
2.91
1711
-Ju
l-13
Sil
ver
Sep
Bu
y41
400.
0044
000
and
450
0040
300.
00S
top
lo
ss h
it-2
.66
1825
-Ju
l-13
Cru
de
oil
Sep
Sel
l62
30.0
058
0064
00.0
0S
top
lo
ss h
it-2
.73
1929
-Au
g-1
3L
ead
Sep
Sel
l14
8.30
140
and
137
152.
00F
irst
tar
get
met
5.60
2029
-Au
g-1
3Z
inc
Sep
Sel
l13
0.40
120
and
118
135.
00B
oo
ked
pro
fit
at 1
23.0
05.
67
216-
Sep
-13
Nat
ura
l g
asO
ctS
ell
244.
0022
0 an
d 2
1525
6.00
Fir
st t
arg
et m
et9.
84
2215
-Oct
-13
Lea
dN
ov
Bu
y13
1.25
140
and
143
128.
00B
oo
ked
pro
fit
at 1
35.0
03.
16
2315
-Oct
-13
Zin
cN
ov
Bu
y11
8.00
126
and
129
114.
50B
oo
ked
pro
fit
at 1
19.8
01.
69
2425
-Oct
-13
Nic
kel
No
vB
uy
900.
0098
087
0.00
Ex
it a
t 87
5.00
-2.8
9
.00
Per
form
ance
of
Met
als
An
d E
ner
gy F
un
dam
enta
l P
osit
ion
al C
alls
(Ja
nu
ary
- D
ecem
ber
) 20
13
Met
al &
En
ergy
An
alys
t: S
and
eep
Joo
n
Performance of Fundamental Positional calls
Note: a) These fundamental calls are for duration of one to four weeks time frame and do not confuse with these with intraday calls.
Note: a) These fundamental calls are for duration of one to four weeks time frame and do not confuse with these with intraday calls.
Performance of Fundamental Positional callsCOMMODITY OUTLOOK 2014
®
8
COMMODITY OUTLOOK 2014
®
9
Per
form
ance
of
Agr
i C
omm
odit
ies
Fun
dam
enta
l P
osit
ion
al C
alls
(Ja
nu
ary
- D
ecem
ber
) 20
13
Agr
o A
nal
yst:
Su
bh
ran
il D
eyS
. N.
Dat
eC
om
mo
dit
yC
on
trac
tT
ren
d
Cal
l In
itia
ted
Tar
get
sS
top
Lo
ss c
losi
ng
R
emar
ks
Pri
ce m
ov
emen
t si
nce
Giv
en P
rice
b
elo
w/a
bo
ve
call
is
init
iate
d (
%)
129
-Jan
-13
Co
rian
der
Ap
ril
Sel
l7,
021.
006,
250.
007,
335.
00B
oo
ked
pro
fit
at 6
435.
009.
11
231
-Jan
-13
CP
OM
arB
uy
460.
0049
0.00
440.
00B
oo
ked
pro
fit
at 4
65.0
01.
09
318
-Feb
-13
Ch
illi
Ap
ril
Sel
l7,
150.
006,
470.
007,
470.
00B
oo
ked
pro
fit
at 6
618.
008.
7
426
-Feb
-13
Pep
per
Ap
ril
Sel
l35
,100
.00
32,3
25.0
036
,545
.00
Bo
ok
ed p
rofi
t at
342
70.0
02.
42
52-
Ap
r-13
Mu
star
dJu
ne
Bu
y3,
532.
003,
815.
003,
380.
00B
oo
ked
pro
fit
at 3
632.
00
2.83
616
-Ap
r-13
Co
cud
Jun
eS
ell
1,56
0.00
1,46
0.00
1,61
0.00
Tar
get
Met
at
1460
.00
7.07
725
-Ap
r-13
Mai
zeJu
ne
Bu
y1,
196.
001,
295.
001,
150.
00E
xit
at
1150
.00
-3.8
5
823
-May
-13
Jeer
aJu
lyB
uy
13,4
50.0
014
,525
.00
12,9
15.0
0B
oo
ked
pro
fit
at 1
3770
.00
2.38
918
-Ju
n-1
3K
apas
Ap
r'14
Sel
l1,
060.
001,
010.
001,
090.
00E
xit
at
1090
.00
-2.7
5
107-
Au
g-1
3K
apas
Ap
r'14
Bu
y99
2.00
1,05
0.00
960.
00T
arg
et m
et a
t 10
50.0
0 5.
34
1116
-Au
g-1
3C
han
aS
ept
Bu
y2,
900.
003,
125.
002,
770.
00B
oo
ked
pro
fit
at 3
088.
00
6.48
1220
-Au
g-1
3C
ocu
dD
ecB
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ked
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at 1
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1428
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g-1
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get
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CP
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-Oct
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Dec
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l3,
607.
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380.
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ked
pro
fit
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star
dD
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3,78
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3,67
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No
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ted
(%
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ted
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Sto
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17-
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at 1
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112.
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Feb
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l g
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Bu
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5.00
197
and
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178.
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top
lo
ss h
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de
oil
Mar
chS
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Sil
ver
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Bu
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0.00
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0 an
d 6
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dA
pri
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122.
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pri
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108.
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510
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223.
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025.
0025
600
and
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800.
00B
oth
tar
get
met
6.01
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r-13
Sil
ver
July
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l45
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000
and
380
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000.
00B
oo
ked
pro
fit
at 4
0800
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10.7
7
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-May
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de
oil
Jun
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5235
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5000
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Bu
y11
3.50
126
and
128
108.
00B
oth
tar
get
met
12.7
8
1322
-May
-13
Zin
cJu
ne
Bu
y10
2.60
110
and
114
100.
00B
oth
tar
get
met
10.0
0
144-
Jun
-13
Nic
kel
July
Bu
y86
5.00
940
and
960
835.
00S
top
lo
ss h
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151-
Jul-
13G
old
Oct
Bu
y25
730.
0027
000
and
275
0025
300.
00B
oo
ked
pro
fit
at 2
6471
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2.88
161-
Jul-
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ilv
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4050
0.00
4400
039
100.
00B
oo
ked
pro
fit
at 4
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1711
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Sil
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Sep
Bu
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400.
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and
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0040
300.
00S
top
lo
ss h
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1825
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oil
Sep
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058
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00.0
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top
lo
ss h
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1929
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g-1
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Sep
Sel
l14
8.30
140
and
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152.
00F
irst
tar
get
met
5.60
2029
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g-1
3Z
inc
Sep
Sel
l13
0.40
120
and
118
135.
00B
oo
ked
pro
fit
at 1
23.0
05.
67
216-
Sep
-13
Nat
ura
l g
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ctS
ell
244.
0022
0 an
d 2
1525
6.00
Fir
st t
arg
et m
et9.
84
2215
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-13
Lea
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Bu
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1.25
140
and
143
128.
00B
oo
ked
pro
fit
at 1
35.0
03.
16
2315
-Oct
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Zin
cN
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Bu
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8.00
126
and
129
114.
50B
oo
ked
pro
fit
at 1
19.8
01.
69
2425
-Oct
-13
Nic
kel
No
vB
uy
900.
0098
087
0.00
Ex
it a
t 87
5.00
-2.8
9
.00
Per
form
ance
of
Met
als
An
d E
ner
gy F
un
dam
enta
l P
osit
ion
al C
alls
(Ja
nu
ary
- D
ecem
ber
) 20
13
Met
al &
En
ergy
An
alys
t: S
and
eep
Joo
n
Economic Indicators
India Inflation Existing Home Sales -U.S
Industrial Production YoY -U.S Non Farm Payroll -U.S
U.S Unemployment Rate Consumer Confidence Index -U.S
COMMODITY OUTLOOK 2014
®
10
Source: Reuters & SMC Research Source: Reuters & SMC Research
Source: Reuters & SMC Research Source: Reuters & SMC Research
Source: Reuters & SMC Research Source: Reuters & SMC Research
% changein absolute numbers
% change in numbers
% change in absolute values
0
1000000
2000000
3000000
4000000
5000000
6000000
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-
12
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-
13
Industrial Production YoY -U.S -20.00
-15.00
-10.00
-5.00
0.00
5.00
10.00
1-Ja
n-08
1-M
ay-0
8
1-Se
p-08
1-Ja
n-09
1-M
ay-0
9
1-Se
p-09
1-Ja
n-10
1-M
ay-1
0
1-Se
p-10
1-Ja
n-11
1-M
ay-1
1
1-Se
p-11
1-Ja
n-12
1-M
ay-1
2
1-Se
p-12
1-Ja
n-13
1-M
ay-1
3
1-Se
p-13
U.S Non Farm Payroll Data
-1000000
-800000
-600000
-400000
-200000
0
200000
400000
600000
Jan
-08
Ap
r-0
8
Jul-
08
Oct
-08
Jan
-09
Ap
r-0
9
Jul-
09
Oct
-09
Jan
-10
Ap
r-1
0
Jul-
10
Oct
-10
Jan
-11
Ap
r-1
1
Jul-
11
Oct
-11
Jan
-12
Ap
r-1
2
Jul-
12
Oct
-12
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
U.S Unemployment Rate
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-0
8
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-0
9
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-1
0
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-1
1
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-1
2
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-1
3
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-0
8
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-0
9
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-1
0
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-1
1
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-1
2
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-1
3
India Inflation
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-
12
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-
13
Existing Home Sales - U.S
Consumer Confidence Index - U.S
Economic Indicators
India Inflation Existing Home Sales -U.S
Industrial Production YoY -U.S Non Farm Payroll -U.S
U.S Unemployment Rate Consumer Confidence Index -U.S
COMMODITY OUTLOOK 2014
®
10
Source: Reuters & SMC Research Source: Reuters & SMC Research
Source: Reuters & SMC Research Source: Reuters & SMC Research
Source: Reuters & SMC Research Source: Reuters & SMC Research
% changein absolute numbers
% change in numbers
% change in absolute values
0
1000000
2000000
3000000
4000000
5000000
6000000
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-
12
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-
13
Industrial Production YoY -U.S -20.00
-15.00
-10.00
-5.00
0.00
5.00
10.00
1-Ja
n-08
1-M
ay-0
8
1-Se
p-08
1-Ja
n-09
1-M
ay-0
9
1-Se
p-09
1-Ja
n-10
1-M
ay-1
0
1-Se
p-10
1-Ja
n-11
1-M
ay-1
1
1-Se
p-11
1-Ja
n-12
1-M
ay-1
2
1-Se
p-12
1-Ja
n-13
1-M
ay-1
3
1-Se
p-13
U.S Non Farm Payroll Data
-1000000
-800000
-600000
-400000
-200000
0
200000
400000
600000
Jan
-08
Ap
r-0
8
Jul-
08
Oct
-08
Jan
-09
Ap
r-0
9
Jul-
09
Oct
-09
Jan
-10
Ap
r-1
0
Jul-
10
Oct
-10
Jan
-11
Ap
r-1
1
Jul-
11
Oct
-11
Jan
-12
Ap
r-1
2
Jul-
12
Oct
-12
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
U.S Unemployment Rate
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-0
8
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-0
9
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-1
0
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-1
1
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-1
2
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-1
3
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-0
8
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-0
9
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-1
0
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-1
1
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-1
2
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-1
3
India Inflation
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-
12
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-
13
Existing Home Sales - U.S
Consumer Confidence Index - U.S
Annual Commentary - Gold
Annual Outlook
Gold
current account deficit (CAD). The world's top gold consumer left
the import duty on bullion unchanged at 10%. The secular bull run which the yellow metal-gold witnessed in the
In the futures market in India, gold traded in backwardation, which last 12 years came to halt in the year 2013 and the prices fell like is the rare of rarest case for this metal due to strict import in the nine pins in COMEX. After registering life time high of above $1915 middle of the steady demand owing to wedding and festive demand. in 2011, prices failed to cross that magical figure and again made Gold prices stabilized and moved in range during the last two the high of nearly $1800 in 2012. But bears made merry in 2013 as months of the year as fear of tapering capped the upside while after testing high of nearly $1700 during the first quarter of 2013 China gold demand supported the prices. prices continued its downside journey with the second quarter
registering the greatest fall of nearly 26%.
The fear of end of quantitative easing, lack of safe haven buying,
better return in riskier assets, ease in geopolitical tensions, accord
between Iran and western countries, fall in crude oil prices and
news of sell off by Cyprus added to the liquidation pressure. Massive
decline in SPDR gold trust holding also prompted selling pressure
in the bullion counter. Yellow metal is generally hedge against Bearish sentiment as seen in 2013 in the yellow metal in the policies of massive quantitative easing, slower economic growth, international markets can reduce as lower level buying can be seen
after second quarter of 2014. Lack of safe haven buying and against declining paper assets, global uncertainty and political and outperformance of global equities markets prompted selling military stress. A short-term resolution to U.S. budget deficit pressure in 2013 but macro-economic weakness of the world is troubles and yet another gold import tax hike in India were the likely to re-emerge in 2014, causing gold to recover lost ground. It negative factors for the precious metals. seems that gold has already factored in the tapering effect of
In the domestic market, weak local currency came to the rescue of quantitative easing, which was started by Fed in its Dec 18 2013
the yellow metal and it managed to bounce back after plunging meeting as it cut its monthly bond purchases from $85 billion to $75 below 25000 in middle of the year. In July and August 2013, billion.domestic gold prices rocketed higher and appreciated from low of
Meanwhile, the rupee dollar movement will also be keenly watched nearly 25500 to above 35000, that is staggering jump of 37% in just as its deprecation has largely supported the domestic prices in MCX
two months. In the same period the local currency rupee in 2013. Going forward in 2014, rupee dollar can move in the range
depreciated nearly 17% amid the concerns of growing fiscal deficit of 55-68.
in India. Moreover, the escalation of import duty of gold in India India shipped $3.34 billion worth of gold jewellery in the (April – kept the prices elevated. But massive selling pressure was September), down 58.34% from the same period the year earlier. witnessed in the two months of September and October 2013, when Total gems and jewellery exports fell by 15.91% to $16.54 billion price of gold dropped by 17% in MCX as rupee strengthened by during the same period.11%. India's gold shipments came to a virtual halt after the Reserve
Bank of India (RBI) told importers on July 22 that a fifth of their To reign in the current deficit and to curb gold demand, the Indian government raised import duty on the metal to 10% and RBI purchases would have to be turned around for export and that 80% imposed several conditions on imports by banks. Inward shipments would be available for the domestic use.of gold were linked to exports, making it necessary for importing
Some countries like Turkey etc raised their gold reserves by the agencies to fulfill export orders before sending any bullion for the
most in five months in August and topped the list of countries that local consumption.
bought more bullion. U.S economy has seen some recovery as it But with the gold imports taken a dip in second half of 2013 and the expanded at faster pace in the second quarter from the previous government is expected to relax its strategy of making gold imports three months, with gross domestic product rising at a 2.5 percent costlier in 2014. annualized rate.
India's gold imports are likely to fall by 40% to 500 tonnes in the In the September Fed meeting, FOMC expressed concerns that a 2013-14 providing relief to the government, which is trying to sharp rise in borrowing costs could weigh on the economy. Federal narrow the Current Account Deficit (CAD) and stabilise the rupee.
Reserve Chairman Bernanke on Dec 18, 2013 meeting took Both the government and the Reserve Bank have taken a slew of
measured approach and reduced monthly bond purchases to $75 measures to curb gold demand and the results are visible as imports
billion from $85 billion. The Federal Reserve has reiterated that it till October have totalled about 400 tonnes. India imported an
will not start to raise rates until unemployment falls to at least 6.5%, estimated 835 tonnes of gold in 2012-13, a key reason for the record
so long as inflation does not threaten to go above 2.5%. Current Account Deficit (CAD) of $88.2 billion, or 4.8% of GDP. India increased the import duty on gold jewellery to 15% from 10% In the domestic market, supply of gold was impacted as the in September in a move aimed to protect the domestic jewellery premium of gold varied from $80-$120 an ounce because of a industry rather than stemming overseas purchases to narrow its
Range: MCX: Rs 25000-35000
COMEX: $1100-1500
Annual Commentary & Outlook : Gold COMMODITY OUTLOOK 2014
®
13
Economic Indicators
Consumer Price Index PI Median -U.S
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
Source: Reuters & SMC Research
in absolute values
% change
Source: Reuters & SMC Research
Comparison of Purchase Manager Index - U.S, China & Euro Zone
Source: Reuters & SMC Research
in absolute values
US CPI-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-
12
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-
13
Baltic Dry Index in absolute values
Baltic Dry Index
0
2000
4000
6000
8000
10000
12000
1-M
ar-
08
1-J
un
-08
1-S
ep
-08
1-D
ec
-08
1-M
ar-
09
1-J
un
-09
1-S
ep
-09
1-D
ec
-09
1-M
ar-
10
1-J
un
-10
1-S
ep
-10
1-D
ec
-10
1-M
ar-
11
1-J
un
-11
1-S
ep
-11
1-D
ec
-11
1-M
ar-
12
1-J
un
-12
1-S
ep
-12
1-D
ec
-12
1-M
ar-
13
1-J
un
-13
1-S
ep
-13
GDP - India & China (YoY)
India GDP (YoY)% Change China GDP (YoY)% Change
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
1-M
ar-0
8
1-Ju
l-08
1-N
ov-0
8
1-M
ar-0
9
1-Ju
l-09
1-N
ov-0
9
1-M
ar-1
0
1-Ju
l-10
1-N
ov-1
0
1-M
ar-1
1
1-Ju
l-11
1-N
ov-1
1
1-M
ar-1
2
1-Ju
l-12
1-N
ov-1
2
1-M
ar-1
3
1-Ju
l-13
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
1-Ja
n-08
1-M
ar-0
8
1-M
ay-0
8
1-Ju
l-08
1-Se
p-08
1-No
v-08
1-Ja
n-09
1-M
ar-0
9
1-M
ay-0
9
1-Ju
l-09
1-Se
p-09
1-No
v-09
1-Ja
n-10
1-M
ar-1
0
1-M
ay-1
0
1-Ju
l-10
1-Se
p-10
1-No
v-10
1-Ja
n-11
1-M
ar-1
1
1-M
ay-1
1
1-Ju
l-11
1-Se
p-11
1-No
v-11
1-Ja
n-12
1-M
ar-1
2
1-M
ay-1
2
1-Ju
l-12
1-Se
p-12
1-No
v-12
1-Ja
n-13
1-M
ar-1
3
1-M
ay-1
3
1-Ju
l-13
1-Se
p-13
1-No
v-13
GDP - Euro Zone & US (YoY) % change
US GDP (YoY)% Change Euro zone GDP (YoY) % Change
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
1-M
ar-0
8
1-Ju
n-0
8
1-Se
p-0
8
1-D
ec-0
8
1-M
ar-0
9
1-Ju
n-0
9
1-Se
p-0
9
1-D
ec-0
9
1-M
ar-1
0
1-Ju
n-1
0
1-Se
p-1
0
1-D
ec-1
0
1-M
ar-1
1
1-Ju
n-1
1
1-Se
p-1
1
1-D
ec-1
1
1-M
ar-1
2
1-Ju
n-1
2
1-Se
p-1
2
1-D
ec-1
2
1-M
ar-1
3
1-Ju
n-1
31-
Sep -
13
®
12
Source: Reuters & SMC Research
Purchase Manager Index-US Purchase Manager Index -China Purchase Manager Index -Euro zone
Annual Commentary - Gold
Annual Outlook
Gold
current account deficit (CAD). The world's top gold consumer left
the import duty on bullion unchanged at 10%. The secular bull run which the yellow metal-gold witnessed in the
In the futures market in India, gold traded in backwardation, which last 12 years came to halt in the year 2013 and the prices fell like is the rare of rarest case for this metal due to strict import in the nine pins in COMEX. After registering life time high of above $1915 middle of the steady demand owing to wedding and festive demand. in 2011, prices failed to cross that magical figure and again made Gold prices stabilized and moved in range during the last two the high of nearly $1800 in 2012. But bears made merry in 2013 as months of the year as fear of tapering capped the upside while after testing high of nearly $1700 during the first quarter of 2013 China gold demand supported the prices. prices continued its downside journey with the second quarter
registering the greatest fall of nearly 26%.
The fear of end of quantitative easing, lack of safe haven buying,
better return in riskier assets, ease in geopolitical tensions, accord
between Iran and western countries, fall in crude oil prices and
news of sell off by Cyprus added to the liquidation pressure. Massive
decline in SPDR gold trust holding also prompted selling pressure
in the bullion counter. Yellow metal is generally hedge against Bearish sentiment as seen in 2013 in the yellow metal in the policies of massive quantitative easing, slower economic growth, international markets can reduce as lower level buying can be seen
after second quarter of 2014. Lack of safe haven buying and against declining paper assets, global uncertainty and political and outperformance of global equities markets prompted selling military stress. A short-term resolution to U.S. budget deficit pressure in 2013 but macro-economic weakness of the world is troubles and yet another gold import tax hike in India were the likely to re-emerge in 2014, causing gold to recover lost ground. It negative factors for the precious metals. seems that gold has already factored in the tapering effect of
In the domestic market, weak local currency came to the rescue of quantitative easing, which was started by Fed in its Dec 18 2013
the yellow metal and it managed to bounce back after plunging meeting as it cut its monthly bond purchases from $85 billion to $75 below 25000 in middle of the year. In July and August 2013, billion.domestic gold prices rocketed higher and appreciated from low of
Meanwhile, the rupee dollar movement will also be keenly watched nearly 25500 to above 35000, that is staggering jump of 37% in just as its deprecation has largely supported the domestic prices in MCX
two months. In the same period the local currency rupee in 2013. Going forward in 2014, rupee dollar can move in the range
depreciated nearly 17% amid the concerns of growing fiscal deficit of 55-68.
in India. Moreover, the escalation of import duty of gold in India India shipped $3.34 billion worth of gold jewellery in the (April – kept the prices elevated. But massive selling pressure was September), down 58.34% from the same period the year earlier. witnessed in the two months of September and October 2013, when Total gems and jewellery exports fell by 15.91% to $16.54 billion price of gold dropped by 17% in MCX as rupee strengthened by during the same period.11%. India's gold shipments came to a virtual halt after the Reserve
Bank of India (RBI) told importers on July 22 that a fifth of their To reign in the current deficit and to curb gold demand, the Indian government raised import duty on the metal to 10% and RBI purchases would have to be turned around for export and that 80% imposed several conditions on imports by banks. Inward shipments would be available for the domestic use.of gold were linked to exports, making it necessary for importing
Some countries like Turkey etc raised their gold reserves by the agencies to fulfill export orders before sending any bullion for the
most in five months in August and topped the list of countries that local consumption.
bought more bullion. U.S economy has seen some recovery as it But with the gold imports taken a dip in second half of 2013 and the expanded at faster pace in the second quarter from the previous government is expected to relax its strategy of making gold imports three months, with gross domestic product rising at a 2.5 percent costlier in 2014. annualized rate.
India's gold imports are likely to fall by 40% to 500 tonnes in the In the September Fed meeting, FOMC expressed concerns that a 2013-14 providing relief to the government, which is trying to sharp rise in borrowing costs could weigh on the economy. Federal narrow the Current Account Deficit (CAD) and stabilise the rupee.
Reserve Chairman Bernanke on Dec 18, 2013 meeting took Both the government and the Reserve Bank have taken a slew of
measured approach and reduced monthly bond purchases to $75 measures to curb gold demand and the results are visible as imports
billion from $85 billion. The Federal Reserve has reiterated that it till October have totalled about 400 tonnes. India imported an
will not start to raise rates until unemployment falls to at least 6.5%, estimated 835 tonnes of gold in 2012-13, a key reason for the record
so long as inflation does not threaten to go above 2.5%. Current Account Deficit (CAD) of $88.2 billion, or 4.8% of GDP. India increased the import duty on gold jewellery to 15% from 10% In the domestic market, supply of gold was impacted as the in September in a move aimed to protect the domestic jewellery premium of gold varied from $80-$120 an ounce because of a industry rather than stemming overseas purchases to narrow its
Range: MCX: Rs 25000-35000
COMEX: $1100-1500
Annual Commentary & Outlook : Gold COMMODITY OUTLOOK 2014
®
13
Economic Indicators
Consumer Price Index PI Median -U.S
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
Source: Reuters & SMC Research
in absolute values
% change
Source: Reuters & SMC Research
Comparison of Purchase Manager Index - U.S, China & Euro Zone
Source: Reuters & SMC Research
in absolute values
US CPI-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-
12
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-
13
Baltic Dry Index in absolute values
Baltic Dry Index
0
2000
4000
6000
8000
10000
12000
1-M
ar-
08
1-J
un
-08
1-S
ep
-08
1-D
ec
-08
1-M
ar-
09
1-J
un
-09
1-S
ep
-09
1-D
ec
-09
1-M
ar-
10
1-J
un
-10
1-S
ep
-10
1-D
ec
-10
1-M
ar-
11
1-J
un
-11
1-S
ep
-11
1-D
ec
-11
1-M
ar-
12
1-J
un
-12
1-S
ep
-12
1-D
ec
-12
1-M
ar-
13
1-J
un
-13
1-S
ep
-13
GDP - India & China (YoY)
India GDP (YoY)% Change China GDP (YoY)% Change
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
1-M
ar-0
8
1-Ju
l-08
1-N
ov-0
8
1-M
ar-0
9
1-Ju
l-09
1-N
ov-0
9
1-M
ar-1
0
1-Ju
l-10
1-N
ov-1
0
1-M
ar-1
1
1-Ju
l-11
1-N
ov-1
1
1-M
ar-1
2
1-Ju
l-12
1-N
ov-1
2
1-M
ar-1
3
1-Ju
l-13
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
1-Ja
n-08
1-M
ar-0
8
1-M
ay-0
8
1-Ju
l-08
1-Se
p-08
1-No
v-08
1-Ja
n-09
1-M
ar-0
9
1-M
ay-0
9
1-Ju
l-09
1-Se
p-09
1-No
v-09
1-Ja
n-10
1-M
ar-1
0
1-M
ay-1
0
1-Ju
l-10
1-Se
p-10
1-No
v-10
1-Ja
n-11
1-M
ar-1
1
1-M
ay-1
1
1-Ju
l-11
1-Se
p-11
1-No
v-11
1-Ja
n-12
1-M
ar-1
2
1-M
ay-1
2
1-Ju
l-12
1-Se
p-12
1-No
v-12
1-Ja
n-13
1-M
ar-1
3
1-M
ay-1
3
1-Ju
l-13
1-Se
p-13
1-No
v -13
GDP - Euro Zone & US (YoY) % change
US GDP (YoY)% Change Euro zone GDP (YoY) % Change
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
1-M
ar-0
8
1-Ju
n-0
8
1-Se
p-0
8
1-D
ec-0
8
1-M
ar-0
9
1-Ju
n-0
9
1-Se
p-0
9
1-D
ec-0
9
1-M
ar-1
0
1-Ju
n-1
0
1-Se
p-1
0
1-D
ec-1
0
1-M
ar-1
1
1-Ju
n-1
1
1-Se
p-1
1
1-D
ec-1
1
1-M
ar-1
2
1-Ju
n-1
2
1-Se
p-1
2
1-D
ec-1
2
1-M
ar-1
3
1-Ju
n-1
31-
Sep-
13
®
12
Source: Reuters & SMC Research
Purchase Manager Index-US Purchase Manager Index -China Purchase Manager Index -Euro zone
Annual Outlook : Gold
supply crunch caused by government restrictions on imports. Thus the premium will also cap the downside of gold in the domestic market going forward in the year 2014.
The growing demand for yellow metal from China may support the prices in this year as China surpassed India as major gold consumer in 2013. But on long term perspective, Chinese demand for gold may not continue to grow at the speed at which it has expanded since the onset of the financial crisis as Chinese gold customers are not culturally attached to the yellow metal as Indian customers do. Moreover the demand for gold in 2013 may recover this year.
The central banks buying of yellow metal will also give further direction in 2014. The most recent data by the IMF shows that in the first eight months of the 2013 central banks added gold at the slowest pace since the start of the financial crisis. According to the World Gold Council “Central bank gold purchases may total 350 tonnes in 2013 after they added 534.6 tonnes in 2012, the most since 1964”.
The ETP (Exchange Traded Product) holding is another factor which will influence the prices of gold in medium term as gold held in physically backed ETPs fundamentally altered the dynamics of supply and demand in 2013. Gold ETPs in 2013 turned into a source of supply, releasing 650 tonnes till November 2013 which is the equivalent of adding 17% to 2012's global gold supply.
Geopolitical tensions in Middle East and in any other part of the globe will have impact on the yellow metal as it is considered safe haven in times of geopolitical uncertainty. Recently, Iran deal which reached in November eased tensions to some extent. The agreement limits Iran's atomic activities in exchange for as much as $7 billion in relief over six months. It allows Iran to export oil at current levels, rather than forcing additional reductions by the buyers, as would have been required under current law.
Movement of dollar index will also influence the yellow metal in 2014 as it can hover in the range of 79-84.
Another factor which can affect the yellow metal is the U.S fiscal crises which have been extended till February 2014. Last year U.S government faced nearly month long shutdown due to lack of quick resolution of debt crisis. Last year, U.S Congress reached an 11th hour agreement to lift the debt ceiling, thereby avoiding a potential default, while simultaneously re-opening the federal government. Under the deal, the U.S borrowing authority has extended through February 7, while the government will be funded through to January 15, 2014.
Stronger fabrication and ETF demand along with cost pressures on mines can give underlying support to the gold prices in 2014.
Jewellery demand will continue to assist the gold prices in 2014 .In the third quarter 2013, jewellery volume rose to its highest level for five years as the sharp drop in prices met with a very positive reception across the globe. Due to the lower prices, demand in value terms was the fourth highest on record. India and China generated the largest volume increase almost 120 tonnes of the 155 tonnes increase in demand in third quarter of 2013.
Investment demand can prop up in 2014 as it plummeted to two year low in 2013. The investment in gold ETF like SPDR can show some bounce back after second quarter of 2014 amid safe haven buying.
The movement of gold in India will very much depend upon the movement of local currency rupee and the domestic supply of gold which has been crippled amid import duty hike by government thereby rise in premium.
Gold prices in COMEX can take key support of $1100 in 2014 while $1500 will be key resistance. On the domestic bourses if rupee manages to get strength in 2014 then it will pressurize Gold prices in MCX. 25000 will be key support for Gold and 35000 will be key resistance in 2014 in the domestic market.
Annual Commentary & Outlook : SilverCOMMODITY OUTLOOK 2014
Yearly price movement of Gold futures (MCX) India Gold Imports (% change YoY)
Source: Reuters & SMC Research Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 7636 9251 10609 13699 16683 20740 27300 30818
High 10763 10720 14320 18294 20924 29433 32464 35074
Low 7627 8542 10582 12731 15950 19515 27170 24830
Close 9265 10598 13630 16686 20728 27329 30859 29445*
5000
10000
15000
20000
25000
30000
35000
40000
* Close as on 13th December 2013
-200.00
-100.00
0.00
100.00
200.00
300.00
400.00
500.00
600.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-
12
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-
13
Annual Commentary - Silver
White metal Silver also showed extreme volatility in 2013 similar to
gold on the domestic bourses. In COMEX, it fell more than 36% since
the beginning of 2013 while in MCX it fell nearly by 24%.
Apart from fall in gold prices, weakness in the base metals pack also
pressurized the silver prices as it has dual properties of precious as
well base metals.
First half of 2013 was dominated by bears and prices fell from
nearly 60000 to below 39000 in June 2013. But in the month of
August alone prices made up the last six months losses and
rocketed higher to again test nearly 60000 as weaker local currency
supported the prices.
Global economic events mainly the fear of tapering of quantitative
easing kept the upside capped in 2013.
When compared to gold this white metal plunged at faster pace
especially in the domestic bourses as gold fell nearly 5 % while
silver fell by 24% in the 2013.
The ongoing concerns that the Federal Reserve could begin to slow
its bond-purchasing program weighted on the sentiments in silver.
Bearish sentiment in the silver in last quarter of 2013 remained
intact after minutes of the Federal Reserve's October meeting
revealed that the central bank could start scaling back its USD85
billion-a-month asset purchase program in the “coming months” if
the economy continues to improve as expected.
Cooling down of Middle East tensions after resolution of Syria
crises and nuclear deal in Iran gave upper hand to the bears in third
and last quarter of 2013. Talks in Geneva in November 2013 among
the U.S. and five other global powers and Iran ended in agreement
on a "first step deal” that is meant to limit advancements in Iran's
nuclear program in exchange for easing economic sanctions against
Tehran.
Falling silver prices continued to put pressure on silver miners in
2013. This is particularly true for those miners who were already
unable to operate profitably at higher prices, such as Coeur d'Alene
Mines. Lower prices of silver prompted silver coins sales in US as
U.S. Mint surpassed the 2011's all time high record sales of
39,868,000 ounces in American Eagle Silver Bullion Coins in 2013.
Demand for the one ounce silver bullion coins has been intense
throughout the entire year of 2013. When sales for the 2013-dated
coins began on January 7, 2013, opening day orders totaled
3,937,000 coins, which seemed to represent the highest ever one-
day sales for American Silver Eagles.
White metal Silver, which is also known as poor man's Gold, was
under heavy selling pressure both in the domestic market and
COMEX last year.
Silver prices often follow the movement of gold and base metals as it
has dual properties which is the key reason that movement of base
metals will have impact on silver.
In India, gold prices fell only by nearly 5% in 2013 while silver
tumbled by more than 24% thus indicating that silver became
cheaper alternative to yellow metal. And more middle class
investors in India will buy silver in 2014 thereby increasing its
physical demand.
Annual Outlook
Silver Range : MCX: Rs 36000-60000
COMEX: $17-28
Dow & Gold Ratio Gold & Crude Ratio (COMEX)
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research Source: Reuters & SMC Research
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
3-Ja
n-11
3-M
ar-1
1
3-M
ay-1
1
3-Ju
l-11
3-Se
p-11
3-N
ov-1
1
3-Ja
n-12
3-M
ar-1
2
3-M
ay-1
2
3-Ju
l-12
3-Se
p-12
3-N
ov-1
2
3-Ja
n-13
3-M
ar-1
3
3-M
ay-1
3
3-Ju
l-13
3-Se
p-13
3-N
ov-1
3
8.00
10.00
12.00
14.00
16.00
18.00
20.00
22.00
24.00
3-Ja
n-11
3-M
ar-1
1
3-M
ay-1
1
3-Ju
l-11
3-Se
p-11
3-N
ov-1
1
3-Ja
n-12
3-M
ar-1
2
3-M
ay-1
2
3-Ju
l-12
3-Se
p-12
3-N
ov-1
2
3-Ja
n-13
3-M
ar-1
3
3-M
ay-1
3
3-Ju
l-13
3-Se
p-13
3-N
ov-1
3
®
14®
15
Rs/10 gms
Annual Outlook : Gold
supply crunch caused by government restrictions on imports. Thus the premium will also cap the downside of gold in the domestic market going forward in the year 2014.
The growing demand for yellow metal from China may support the prices in this year as China surpassed India as major gold consumer in 2013. But on long term perspective, Chinese demand for gold may not continue to grow at the speed at which it has expanded since the onset of the financial crisis as Chinese gold customers are not culturally attached to the yellow metal as Indian customers do. Moreover the demand for gold in 2013 may recover this year.
The central banks buying of yellow metal will also give further direction in 2014. The most recent data by the IMF shows that in the first eight months of the 2013 central banks added gold at the slowest pace since the start of the financial crisis. According to the World Gold Council “Central bank gold purchases may total 350 tonnes in 2013 after they added 534.6 tonnes in 2012, the most since 1964”.
The ETP (Exchange Traded Product) holding is another factor which will influence the prices of gold in medium term as gold held in physically backed ETPs fundamentally altered the dynamics of supply and demand in 2013. Gold ETPs in 2013 turned into a source of supply, releasing 650 tonnes till November 2013 which is the equivalent of adding 17% to 2012's global gold supply.
Geopolitical tensions in Middle East and in any other part of the globe will have impact on the yellow metal as it is considered safe haven in times of geopolitical uncertainty. Recently, Iran deal which reached in November eased tensions to some extent. The agreement limits Iran's atomic activities in exchange for as much as $7 billion in relief over six months. It allows Iran to export oil at current levels, rather than forcing additional reductions by the buyers, as would have been required under current law.
Movement of dollar index will also influence the yellow metal in 2014 as it can hover in the range of 79-84.
Another factor which can affect the yellow metal is the U.S fiscal crises which have been extended till February 2014. Last year U.S government faced nearly month long shutdown due to lack of quick resolution of debt crisis. Last year, U.S Congress reached an 11th hour agreement to lift the debt ceiling, thereby avoiding a potential default, while simultaneously re-opening the federal government. Under the deal, the U.S borrowing authority has extended through February 7, while the government will be funded through to January 15, 2014.
Stronger fabrication and ETF demand along with cost pressures on mines can give underlying support to the gold prices in 2014.
Jewellery demand will continue to assist the gold prices in 2014 .In the third quarter 2013, jewellery volume rose to its highest level for five years as the sharp drop in prices met with a very positive reception across the globe. Due to the lower prices, demand in value terms was the fourth highest on record. India and China generated the largest volume increase almost 120 tonnes of the 155 tonnes increase in demand in third quarter of 2013.
Investment demand can prop up in 2014 as it plummeted to two year low in 2013. The investment in gold ETF like SPDR can show some bounce back after second quarter of 2014 amid safe haven buying.
The movement of gold in India will very much depend upon the movement of local currency rupee and the domestic supply of gold which has been crippled amid import duty hike by government thereby rise in premium.
Gold prices in COMEX can take key support of $1100 in 2014 while $1500 will be key resistance. On the domestic bourses if rupee manages to get strength in 2014 then it will pressurize Gold prices in MCX. 25000 will be key support for Gold and 35000 will be key resistance in 2014 in the domestic market.
Annual Commentary & Outlook : SilverCOMMODITY OUTLOOK 2014
Yearly price movement of Gold futures (MCX) India Gold Imports (% change YoY)
Source: Reuters & SMC Research Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 7636 9251 10609 13699 16683 20740 27300 30818
High 10763 10720 14320 18294 20924 29433 32464 35074
Low 7627 8542 10582 12731 15950 19515 27170 24830
Close 9265 10598 13630 16686 20728 27329 30859 29445*
5000
10000
15000
20000
25000
30000
35000
40000
* Close as on 13th December 2013
-200.00
-100.00
0.00
100.00
200.00
300.00
400.00
500.00
600.00
1-J
an
-08
1-A
pr-
08
1-J
ul-
08
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-
09
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-
10
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-
11
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-
12
1-O
ct-
12
1-J
an
-13
1-A
pr-
13
1-J
ul-
13
1-O
ct-
13
Annual Commentary - Silver
White metal Silver also showed extreme volatility in 2013 similar to
gold on the domestic bourses. In COMEX, it fell more than 36% since
the beginning of 2013 while in MCX it fell nearly by 24%.
Apart from fall in gold prices, weakness in the base metals pack also
pressurized the silver prices as it has dual properties of precious as
well base metals.
First half of 2013 was dominated by bears and prices fell from
nearly 60000 to below 39000 in June 2013. But in the month of
August alone prices made up the last six months losses and
rocketed higher to again test nearly 60000 as weaker local currency
supported the prices.
Global economic events mainly the fear of tapering of quantitative
easing kept the upside capped in 2013.
When compared to gold this white metal plunged at faster pace
especially in the domestic bourses as gold fell nearly 5 % while
silver fell by 24% in the 2013.
The ongoing concerns that the Federal Reserve could begin to slow
its bond-purchasing program weighted on the sentiments in silver.
Bearish sentiment in the silver in last quarter of 2013 remained
intact after minutes of the Federal Reserve's October meeting
revealed that the central bank could start scaling back its USD85
billion-a-month asset purchase program in the “coming months” if
the economy continues to improve as expected.
Cooling down of Middle East tensions after resolution of Syria
crises and nuclear deal in Iran gave upper hand to the bears in third
and last quarter of 2013. Talks in Geneva in November 2013 among
the U.S. and five other global powers and Iran ended in agreement
on a "first step deal” that is meant to limit advancements in Iran's
nuclear program in exchange for easing economic sanctions against
Tehran.
Falling silver prices continued to put pressure on silver miners in
2013. This is particularly true for those miners who were already
unable to operate profitably at higher prices, such as Coeur d'Alene
Mines. Lower prices of silver prompted silver coins sales in US as
U.S. Mint surpassed the 2011's all time high record sales of
39,868,000 ounces in American Eagle Silver Bullion Coins in 2013.
Demand for the one ounce silver bullion coins has been intense
throughout the entire year of 2013. When sales for the 2013-dated
coins began on January 7, 2013, opening day orders totaled
3,937,000 coins, which seemed to represent the highest ever one-
day sales for American Silver Eagles.
White metal Silver, which is also known as poor man's Gold, was
under heavy selling pressure both in the domestic market and
COMEX last year.
Silver prices often follow the movement of gold and base metals as it
has dual properties which is the key reason that movement of base
metals will have impact on silver.
In India, gold prices fell only by nearly 5% in 2013 while silver
tumbled by more than 24% thus indicating that silver became
cheaper alternative to yellow metal. And more middle class
investors in India will buy silver in 2014 thereby increasing its
physical demand.
Annual Outlook
Silver Range : MCX: Rs 36000-60000
COMEX: $17-28
Dow & Gold Ratio Gold & Crude Ratio (COMEX)
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research Source: Reuters & SMC Research
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
3-Ja
n-11
3-M
ar-1
1
3-M
ay-1
1
3-Ju
l-11
3-Se
p-11
3-N
ov-1
1
3-Ja
n-12
3-M
ar-1
2
3-M
ay-1
2
3-Ju
l-12
3-Se
p-12
3-N
ov-1
2
3-Ja
n-13
3-M
ar-1
3
3-M
ay-1
3
3-Ju
l-13
3-Se
p-13
3-N
ov-1
3
8.00
10.00
12.00
14.00
16.00
18.00
20.00
22.00
24.00
3-Ja
n-11
3-M
ar-1
1
3-M
ay-1
1
3-Ju
l-11
3-Se
p-11
3-N
ov-1
1
3-Ja
n-12
3-M
ar-1
2
3-M
ay-1
2
3-Ju
l-12
3-Se
p-12
3-N
ov-1
2
3-Ja
n-13
3-M
ar-1
3
3-M
ay-1
3
3-Ju
l-13
3-Se
p-13
3-N
ov-1
3
®
14®
15
Rs/10 gms
Annual Outlook : Silver Annual Commentary & Outlook : Crude Oil
ETF demand of silver continues to remain elevated in 2014 as seen
last year. Silver prices also hinges on the global economic outlook
where U.S employment data and housing data to affect the prices.
Silver prices may gain upside momentum after the second quarter
of 2014.
Meanwhile, the growing usage of silver in the various applications
may give some support to its physical demand. Recent advances in
biotechnology have brought a renewed focus on silver's centuries
old history as an important medical weapon. According to the silver
Institute the medical use of silver has helped reduce the growing
threat of antibiotic resistant germs. Nowadays the need to combat
antibiotic resistant superbugs and to suppress hospital acquired
infections has increased the importance and number of uses of
silver infused products. Motorola uses silver embedded in plastic
housings for many of its mobile phones. Other usage of silver is in
the cases of calculators. Paints too have been made more effective
against molds, yeasts and various bacteria with the addition of
silver. Silver is a critical element in the production of Ethylene Oxide
(EO), a basic chemical vital in the production of polyester textiles,
Polyethylene Terephthalate (PET) bottles, and thousands of other
products commonly used in everyday life.
The popularity of silver coins globally will give support its prices of
white metal. While the price of gold continues to trade at levels that
puts gold bullion coins out of the reach of many investors, silver
remains relatively affordable. Add to this the American Eagle Silver
Bullion Coin's unique backing by the U.S. Government and its
beautiful and uniquely American design increased its demand
recently.
Silver's underlying demand/supply fundamentals remain weak
and inventory is abundant. Above ground inventory in China (the
growing source of demand for the metal since 2009) remains as
high as 18 months of fabrication demand, up from 16 months at the
start of 2012 and only 4 months in 2009.
Silver's industrial refuse (silver scrap) is not usually recycled
because costs are high as compared to the price of the silver
recovered. This makes silver more scarce than gold, and that
scarcity is increasing. So, given the supply crunch of silver and
growing usage prices will get support going forward in 2014.
According to silver institute “stronger silver industrial demand in
the U.S. and Asia will be a key factor for driving growth through
2015, with healthy developing-country demand especially in
markets such as China and India”
Gold Silver ratio is expected to move in the range of 50-70 in 2014.
Silver prices can take key support of $17 in COMEX and 36000 in
MCX in 2014. Silver will face resistance at $28 in COMEX and 60000
in MCX.
Gold & Silver Ratio (COMEX)
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 13290 19400 19422 18475 26730 46250 51000 57851
High 23148 21174 27500 29580 46383 73600 65723 59974
Low 13037 15975 15539 17392 23610 41280 51000 38536
Close 19424 19463 18355 26771 46217 51029 57864 44723*
10000
20000
30000
40000
50000
60000
70000
80000
Yearly price movement of Silver futures (MCX)
* Close as on 13th December 2013
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
70.00
3-J
an
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3-M
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11
3-M
ay
-11
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3-S
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3-J
an
-12
3-M
ar-
12
3-M
ay
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3-J
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12
3-S
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3-N
ov
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3-J
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3-M
ar-
13
3-M
ay
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3-J
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13
3-S
ep
-13
3-N
ov
-13
Annual Commentary - Crude Oil
Crude oil, which is also known as life blood of every economy,
showed strong upside momentum as it traded in the range of nearly
$86-112 in NYMEX and 4740-7700 in MCX in 2013.
Crude oil rose the most from June to August 2013 in NYMEX while it
rose by nearly 63% in MCX in four months from May to August amid
depreciating local currency and Middle East tensions. In the month
of August, crude oil tested the high of $112 in NYMEX and 7700 in
MCX.
Geopolitical tensions added premium in crude prices. Military
takeover of power and the installation of a new government in
Egypt and tensions in Libya supported the prices. Labor
demonstrations in eastern Libya have forced the closure of a key
port in August 2013. Pressure on oil markets continued as post-
Arab Spring governments found hard to deliver on their promises.
Syria was in focus for in most part of 2013 with the U.S. stated that it
would increase aid to Syrian rebels who have been fighting against
the regime of President Bashar al Assad in a bloody civil war. There
were concerns that violence in Syria will extend to other parts of the
oil rich Middle East.
Prices dropped sharply from September 2013 to November in MCX
and NYMEX. In these three months international prices dropped
nearly 22 % in NYMEX while 16% in MCX. U.S. crude production
surged as the combination of horizontal drilling and hydraulic
fracturing, or fracking, has unlocked supplies trapped in shale
formations in the central part of the country. Disappointing
quarterly U.S corporate earnings offseted potential gains from the
positive global economic data.
Fear of tapering of monetary stimulus capped the upside in crude
oil prices. Fed Chairman Ben S. Bernanke stated that the central
bank may trim the $85 billion-a-month bond purchases and would
end them in the middle of 2014 if the economy continues to
improve.
Prices stabilized to some extent in the month of December 2013 as
winter demand and falling inventories supported the prices higher.
Crude oil prices gained on ideas that January 2014 start up of a
pipeline from Cushing, Oklahoma, to the Gulf Coast would drain
crude stocks at the giant storage hub.
Annual Outlook
Crude Oil Range: MCX: Rs 4500-7000
NYMEX $75-115
Crude oil, often known as black gold, can trade on volatile path in
2014 as the key factors impacting the investor's sentiment in Crude
oil will be the geopolitical tensions, macroeconomic events and U.S
tapering of stimulus measures along with movement of Greenback.
On the domestic bourses movement of local currency will be
deciding factor in 2014 as its weakness has helped crude to test life
time high in 2013.
The key factor for crude oil prices will be issue of Fed tapering in
2014. In the last month of 2013 upward revision in U.S. third-
quarter Gross Domestic Product growth prompted Fed to reduce its
monthly bond-buying programme from $85 billion to $75 billion.
The oil market is on the cusp of a new cycle, with demand in the
United States growing at a faster pace than in emerging economies
such as China and India for the first time in a decade.
Last year in November, Iran deal was reached and the global
economic implications of Iran deal are immense since a deal on
Tehran and its nuclear weapons programmes rules out the prospect
of an Israeli or U.S air strike that escalates into a wider Middle East
war. Washington's nuclear deal with Iran could also mean the
prospect of a negotiated settlement in Syria and political stability in
Lebanon.
Production increases in Libya and Iraq could lead to lower output
by Saudi Arabia in 2014, which will bring the reserve capacity to
more comfortable levels.
Moderate increase in oil demand is expected to be balanced by the
rise in global supply, especially if U.S shale production continues to
expand in the coming years.
China demand is also key factor to give direction to crude oil prices
as China's crude oil imports reached 23.56 million tonnes in
November 2013.
U.S. EIA (Energy Information Administration) projects global
consumption, which averaged 89.2 million barrels per day in 2012,
will grow annually by 1.1 million barrels per day (bbl/d) in both
2013 and 2014. China, the Middle East, Central & South America,
and other countries outside of the Organization for Economic
COMMODITY OUTLOOK 2014
®
16®
17
Rs/kg
Annual Outlook : Silver Annual Commentary & Outlook : Crude Oil
ETF demand of silver continues to remain elevated in 2014 as seen
last year. Silver prices also hinges on the global economic outlook
where U.S employment data and housing data to affect the prices.
Silver prices may gain upside momentum after the second quarter
of 2014.
Meanwhile, the growing usage of silver in the various applications
may give some support to its physical demand. Recent advances in
biotechnology have brought a renewed focus on silver's centuries
old history as an important medical weapon. According to the silver
Institute the medical use of silver has helped reduce the growing
threat of antibiotic resistant germs. Nowadays the need to combat
antibiotic resistant superbugs and to suppress hospital acquired
infections has increased the importance and number of uses of
silver infused products. Motorola uses silver embedded in plastic
housings for many of its mobile phones. Other usage of silver is in
the cases of calculators. Paints too have been made more effective
against molds, yeasts and various bacteria with the addition of
silver. Silver is a critical element in the production of Ethylene Oxide
(EO), a basic chemical vital in the production of polyester textiles,
Polyethylene Terephthalate (PET) bottles, and thousands of other
products commonly used in everyday life.
The popularity of silver coins globally will give support its prices of
white metal. While the price of gold continues to trade at levels that
puts gold bullion coins out of the reach of many investors, silver
remains relatively affordable. Add to this the American Eagle Silver
Bullion Coin's unique backing by the U.S. Government and its
beautiful and uniquely American design increased its demand
recently.
Silver's underlying demand/supply fundamentals remain weak
and inventory is abundant. Above ground inventory in China (the
growing source of demand for the metal since 2009) remains as
high as 18 months of fabrication demand, up from 16 months at the
start of 2012 and only 4 months in 2009.
Silver's industrial refuse (silver scrap) is not usually recycled
because costs are high as compared to the price of the silver
recovered. This makes silver more scarce than gold, and that
scarcity is increasing. So, given the supply crunch of silver and
growing usage prices will get support going forward in 2014.
According to silver institute “stronger silver industrial demand in
the U.S. and Asia will be a key factor for driving growth through
2015, with healthy developing-country demand especially in
markets such as China and India”
Gold Silver ratio is expected to move in the range of 50-70 in 2014.
Silver prices can take key support of $17 in COMEX and 36000 in
MCX in 2014. Silver will face resistance at $28 in COMEX and 60000
in MCX.
Gold & Silver Ratio (COMEX)
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 13290 19400 19422 18475 26730 46250 51000 57851
High 23148 21174 27500 29580 46383 73600 65723 59974
Low 13037 15975 15539 17392 23610 41280 51000 38536
Close 19424 19463 18355 26771 46217 51029 57864 44723*
10000
20000
30000
40000
50000
60000
70000
80000
Yearly price movement of Silver futures (MCX)
* Close as on 13th December 2013
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
70.00
3-J
an
-11
3-M
ar-
11
3-M
ay
-11
3-J
ul-
11
3-S
ep
-11
3-N
ov
-11
3-J
an
-12
3-M
ar-
12
3-M
ay
-12
3-J
ul-
12
3-S
ep
-12
3-N
ov
-12
3-J
an
-13
3-M
ar-
13
3-M
ay
-13
3-J
ul-
13
3-S
ep
-13
3-N
ov
-13
Annual Commentary - Crude Oil
Crude oil, which is also known as life blood of every economy,
showed strong upside momentum as it traded in the range of nearly
$86-112 in NYMEX and 4740-7700 in MCX in 2013.
Crude oil rose the most from June to August 2013 in NYMEX while it
rose by nearly 63% in MCX in four months from May to August amid
depreciating local currency and Middle East tensions. In the month
of August, crude oil tested the high of $112 in NYMEX and 7700 in
MCX.
Geopolitical tensions added premium in crude prices. Military
takeover of power and the installation of a new government in
Egypt and tensions in Libya supported the prices. Labor
demonstrations in eastern Libya have forced the closure of a key
port in August 2013. Pressure on oil markets continued as post-
Arab Spring governments found hard to deliver on their promises.
Syria was in focus for in most part of 2013 with the U.S. stated that it
would increase aid to Syrian rebels who have been fighting against
the regime of President Bashar al Assad in a bloody civil war. There
were concerns that violence in Syria will extend to other parts of the
oil rich Middle East.
Prices dropped sharply from September 2013 to November in MCX
and NYMEX. In these three months international prices dropped
nearly 22 % in NYMEX while 16% in MCX. U.S. crude production
surged as the combination of horizontal drilling and hydraulic
fracturing, or fracking, has unlocked supplies trapped in shale
formations in the central part of the country. Disappointing
quarterly U.S corporate earnings offseted potential gains from the
positive global economic data.
Fear of tapering of monetary stimulus capped the upside in crude
oil prices. Fed Chairman Ben S. Bernanke stated that the central
bank may trim the $85 billion-a-month bond purchases and would
end them in the middle of 2014 if the economy continues to
improve.
Prices stabilized to some extent in the month of December 2013 as
winter demand and falling inventories supported the prices higher.
Crude oil prices gained on ideas that January 2014 start up of a
pipeline from Cushing, Oklahoma, to the Gulf Coast would drain
crude stocks at the giant storage hub.
Annual Outlook
Crude Oil Range: MCX: Rs 4500-7000
NYMEX $75-115
Crude oil, often known as black gold, can trade on volatile path in
2014 as the key factors impacting the investor's sentiment in Crude
oil will be the geopolitical tensions, macroeconomic events and U.S
tapering of stimulus measures along with movement of Greenback.
On the domestic bourses movement of local currency will be
deciding factor in 2014 as its weakness has helped crude to test life
time high in 2013.
The key factor for crude oil prices will be issue of Fed tapering in
2014. In the last month of 2013 upward revision in U.S. third-
quarter Gross Domestic Product growth prompted Fed to reduce its
monthly bond-buying programme from $85 billion to $75 billion.
The oil market is on the cusp of a new cycle, with demand in the
United States growing at a faster pace than in emerging economies
such as China and India for the first time in a decade.
Last year in November, Iran deal was reached and the global
economic implications of Iran deal are immense since a deal on
Tehran and its nuclear weapons programmes rules out the prospect
of an Israeli or U.S air strike that escalates into a wider Middle East
war. Washington's nuclear deal with Iran could also mean the
prospect of a negotiated settlement in Syria and political stability in
Lebanon.
Production increases in Libya and Iraq could lead to lower output
by Saudi Arabia in 2014, which will bring the reserve capacity to
more comfortable levels.
Moderate increase in oil demand is expected to be balanced by the
rise in global supply, especially if U.S shale production continues to
expand in the coming years.
China demand is also key factor to give direction to crude oil prices
as China's crude oil imports reached 23.56 million tonnes in
November 2013.
U.S. EIA (Energy Information Administration) projects global
consumption, which averaged 89.2 million barrels per day in 2012,
will grow annually by 1.1 million barrels per day (bbl/d) in both
2013 and 2014. China, the Middle East, Central & South America,
and other countries outside of the Organization for Economic
COMMODITY OUTLOOK 2014
®
16®
17
Rs/kg
Annual Outlook : Crude Oil Annual Commentary & Outlook : Natural Gas
Cooperation and Development (OECD) account for nearly all
consumption growth. Projected OECD liquid fuels consumption
declined by 0.1 million bbl/d in 2013 and 0.2 million bbl/d in 2014.
In 2014, growth in the total consumption of liquid fuels could slow
to 30,000 bbl/d. EIA expects gasoline consumption to fall by 0.4%
this year as continued improvements in new-vehicle fuel economy
boost overall fuel efficiency growth. Japanese oil demand is likely to
decline by 0.13 mb/d in 2014, as the country continues to replace
oil as a source of power in its energy mix.
EIA projects total OPEC liquid fuels production to decline by 0.8
million bbl/d to 35.9 million bbl/d in 2013 and to stay near that
level in 2014. EIA expects Saudi Arabia to begin reducing its
production in early 2014 as some of the disrupted production
comes back on line and non-OPEC supply continues to grow.
Forecast of non-OPEC liquid fuels production, which averaged 52.7
million bbl/d in 2012, increases by 1.6 million bbl/d in 2013 and by
1.5 million bbl/d in 2014.
EIA expects U.S. crude oil production to rise from an average of 6.5
million bbl/d in 2012 to 7.5 million bbl/d in 2013 and 8.5 million
bbl/d in 2014.
It is expected that increase in global real GDP growth from 2.4% in
2013 to about 3.1% in 2014 is the best since 2010, with growth in
advanced economies up from 1.1% in 2013 to about 2.0% in 2014.
Growth is likely to be around 3% in the US and UK in 2014-15.
Japan's growth is likely to show significantly during 2014 due to the
consumption tax hikes. Global GDP factor could prove to be positive
for crude oil.
Moreover, oil is not just an energy form; it's an alternative
investment, particularly for institutional investors (hedge funds,
investment funds, and other high-net-worth investors) as the mode
of portfolio allocation of these entities in Crude oil will also impact
its prices in 2014. Furthermore any hurricane disrupting the
supplies in 2014 can give support to the prices.
Crude oil prices in NYMEX has key a support at $75 and 4500 in MCX
while it has key resistance near $115 in NYMEX and 7000 in MCX.
COMMODITY OUTLOOK 2014
Brent & Light Sweet Crude Oil Spread($)
Source: Reuters & SMC Research
Yearly price movement of Crude Oil futures (MCX)
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
30.00
3-J
an
-11
3-M
ar-1
1
3-M
ay
-11
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ov
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an
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ar-1
2
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ay
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12
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an
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3-M
ar-1
3
3-M
ay
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3-J
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13
3-S
ep
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3-N
ov
-13
Annual Commentary - Natural gas
Natural gas prices have shown recovery in the third consecutive
year in 2013 as prices steadily appreciated from low of 176 in
January 2013 to above 245 in April 2013. Its prices appreciated
nearly 40% both in NYMEX and MCX in first four months of the year.
Decline in inventories and weather concerns supported its prices.
Fall in rig count also supported the prices higher. The US rig count
declined to 1758 in April 2013. Prices dipped lower in middle of the
year on feeble demand but prices recovered and continued upside
journey from August 2013. Natural gas prices hit yearly high of
above 270 in August 2013 in MCX and above $4.41 in NYMEX. On
the domestic bourses weak local currency kept the price elevated in
the month of August as rupee dollar tested above 68 levels.
Colder winter temperatures as compared with the record warm
temperatures in 2012 increased the amount of natural gas used for
residential and commercial space heating.
Natural gas prices have shown steep rise in last two years after
testing 10 year low of below $2 in NYMEX due to production cuts by
some producers and decline in rig count.
From 5 April to 13 September, US natural gas inventory has
increased by 94% to 3.3 trillion cubic feet, just above the six-year
(2007-2012) historical average. US natural gas inventories usually
rise in this period as US gas production outweighs demand.
Some factors kept pressurizing the market in 2013 as natural-gas
production, which remained at record highs, fueled by hydraulic
fracturing and horizontal-drilling techniques that have enabled
energy producers to tap supplies in shale-gas fields.
Natural gas demand has lifted since the US Environmental
Protection Agency (EPA) drafted laws to restrict emissions on new
coal power plants. It is estimated that CO2 emission standard for
new coal plants will be eased, but it is still unlikely to change the
preference for gas power over coal power in the US utility
landscape. There is a structural shift toward natural gas power
generation in the medium to longer term, but higher natural gas
prices slow this transition in the immediate term.
Natural gas prices got support in November and December 2013
due to built up of winter demand and on worries that storms could
threaten output from the Gulf of Mexico. Also seasonal demand for
natural gas generally increases during the fourth quarter which
gave support to the prices. During the last quarter of 2013,
inventory building was below average, as demand was strong
during the relatively hot summer period. Therefore, the level of
inventories was at the lowest level in five years.
Annual Outlook
Natural gas Range : MCX: Rs 190-350
NYMEX $3.2-5.5
Upside momentum of the last two years may prevail in 2014 due to
decline in rig count and inventories along with increasing usage as
clean fuel considering stringent environmental norms across the
globe.
Natural gas is considered clean fuel as compared to other energy
resources such as coal and nuclear energy. So both industrial and
household usage of natural gas will keep the prices well supported.
Weather related news can have a big impact on natural gas prices,
both from a supply and a demand side going forward in 2014.
According to Energy Information Administration “Roughly half of
all U.S. households rely on natural gas as their primary heating
source”
But if natural gas prices would rally much further, electricity
producers would switch back from gas to coal, as carbon prices are
still very low which can reduce its demand and thereby pressurize
prices. Finally, if prices rally, it will become more profitable to
produce more natural gas, which ultimately will lead to higher
stocks, and therefore put a cap on natural gas prices in 2014.
From the demand side, US economic growth and the closure of older
coal plants should lead to a rise in gas consumption. From a supply
side, there will be a cap on natural gas prices, as higher prices will
lead to increased production. This is especially true given that there
is significant production capacity that is ready to be 'switched on',
but which is currently offline due to low revenues. However, this
will not prevent US production from expanding, as it will be a part of
the US' carbon reduction plan, helpful in becoming energy
independent and be subservient in meeting the rising demand for
natural gas for LNG export.
U.S. Energy Information Administration raised its estimate for the
domestic natural gas production in 2014, expecting output this year
to be up more than 1 percent from 2013's estimated record high
levels. It is expected that marketed natural gas production in 2014
to rise by 0.74 billion cubic feet per day from 2013 to 71.03 bcf per
day. Growth has mostly been driven by rising production from the
Marcellus shale play in Appalachia, which has more than outpaced
declines in offshore Gulf of Mexico and Haynesville shale output.
Pipeline imports from Canada are expected to continue to decline in
COMMODITY OUTLOOK 2014
®
18®
19
Source: Reuters & SMC Research* Close as on 13th December 2013
2006 2007 2008 2009 2010 2011 2012 2013
Open 2789 2855 3740 2365 3789 4204 5326 5118
High 3760 3812 6375 3850 4270 5456 5728 7785
Low 2737 2370 2053 2100 3350 3636 4546 4737
Close 2856 3721 2312 3787 4198 5336 5110 6118*
1500
2500
3500
4500
5500
6500
7500
8500
Rs./Barrel
Annual Outlook : Crude Oil Annual Commentary & Outlook : Natural Gas
Cooperation and Development (OECD) account for nearly all
consumption growth. Projected OECD liquid fuels consumption
declined by 0.1 million bbl/d in 2013 and 0.2 million bbl/d in 2014.
In 2014, growth in the total consumption of liquid fuels could slow
to 30,000 bbl/d. EIA expects gasoline consumption to fall by 0.4%
this year as continued improvements in new-vehicle fuel economy
boost overall fuel efficiency growth. Japanese oil demand is likely to
decline by 0.13 mb/d in 2014, as the country continues to replace
oil as a source of power in its energy mix.
EIA projects total OPEC liquid fuels production to decline by 0.8
million bbl/d to 35.9 million bbl/d in 2013 and to stay near that
level in 2014. EIA expects Saudi Arabia to begin reducing its
production in early 2014 as some of the disrupted production
comes back on line and non-OPEC supply continues to grow.
Forecast of non-OPEC liquid fuels production, which averaged 52.7
million bbl/d in 2012, increases by 1.6 million bbl/d in 2013 and by
1.5 million bbl/d in 2014.
EIA expects U.S. crude oil production to rise from an average of 6.5
million bbl/d in 2012 to 7.5 million bbl/d in 2013 and 8.5 million
bbl/d in 2014.
It is expected that increase in global real GDP growth from 2.4% in
2013 to about 3.1% in 2014 is the best since 2010, with growth in
advanced economies up from 1.1% in 2013 to about 2.0% in 2014.
Growth is likely to be around 3% in the US and UK in 2014-15.
Japan's growth is likely to show significantly during 2014 due to the
consumption tax hikes. Global GDP factor could prove to be positive
for crude oil.
Moreover, oil is not just an energy form; it's an alternative
investment, particularly for institutional investors (hedge funds,
investment funds, and other high-net-worth investors) as the mode
of portfolio allocation of these entities in Crude oil will also impact
its prices in 2014. Furthermore any hurricane disrupting the
supplies in 2014 can give support to the prices.
Crude oil prices in NYMEX has key a support at $75 and 4500 in MCX
while it has key resistance near $115 in NYMEX and 7000 in MCX.
COMMODITY OUTLOOK 2014
Brent & Light Sweet Crude Oil Spread($)
Source: Reuters & SMC Research
Yearly price movement of Crude Oil futures (MCX)
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
30.00
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Annual Commentary - Natural gas
Natural gas prices have shown recovery in the third consecutive
year in 2013 as prices steadily appreciated from low of 176 in
January 2013 to above 245 in April 2013. Its prices appreciated
nearly 40% both in NYMEX and MCX in first four months of the year.
Decline in inventories and weather concerns supported its prices.
Fall in rig count also supported the prices higher. The US rig count
declined to 1758 in April 2013. Prices dipped lower in middle of the
year on feeble demand but prices recovered and continued upside
journey from August 2013. Natural gas prices hit yearly high of
above 270 in August 2013 in MCX and above $4.41 in NYMEX. On
the domestic bourses weak local currency kept the price elevated in
the month of August as rupee dollar tested above 68 levels.
Colder winter temperatures as compared with the record warm
temperatures in 2012 increased the amount of natural gas used for
residential and commercial space heating.
Natural gas prices have shown steep rise in last two years after
testing 10 year low of below $2 in NYMEX due to production cuts by
some producers and decline in rig count.
From 5 April to 13 September, US natural gas inventory has
increased by 94% to 3.3 trillion cubic feet, just above the six-year
(2007-2012) historical average. US natural gas inventories usually
rise in this period as US gas production outweighs demand.
Some factors kept pressurizing the market in 2013 as natural-gas
production, which remained at record highs, fueled by hydraulic
fracturing and horizontal-drilling techniques that have enabled
energy producers to tap supplies in shale-gas fields.
Natural gas demand has lifted since the US Environmental
Protection Agency (EPA) drafted laws to restrict emissions on new
coal power plants. It is estimated that CO2 emission standard for
new coal plants will be eased, but it is still unlikely to change the
preference for gas power over coal power in the US utility
landscape. There is a structural shift toward natural gas power
generation in the medium to longer term, but higher natural gas
prices slow this transition in the immediate term.
Natural gas prices got support in November and December 2013
due to built up of winter demand and on worries that storms could
threaten output from the Gulf of Mexico. Also seasonal demand for
natural gas generally increases during the fourth quarter which
gave support to the prices. During the last quarter of 2013,
inventory building was below average, as demand was strong
during the relatively hot summer period. Therefore, the level of
inventories was at the lowest level in five years.
Annual Outlook
Natural gas Range : MCX: Rs 190-350
NYMEX $3.2-5.5
Upside momentum of the last two years may prevail in 2014 due to
decline in rig count and inventories along with increasing usage as
clean fuel considering stringent environmental norms across the
globe.
Natural gas is considered clean fuel as compared to other energy
resources such as coal and nuclear energy. So both industrial and
household usage of natural gas will keep the prices well supported.
Weather related news can have a big impact on natural gas prices,
both from a supply and a demand side going forward in 2014.
According to Energy Information Administration “Roughly half of
all U.S. households rely on natural gas as their primary heating
source”
But if natural gas prices would rally much further, electricity
producers would switch back from gas to coal, as carbon prices are
still very low which can reduce its demand and thereby pressurize
prices. Finally, if prices rally, it will become more profitable to
produce more natural gas, which ultimately will lead to higher
stocks, and therefore put a cap on natural gas prices in 2014.
From the demand side, US economic growth and the closure of older
coal plants should lead to a rise in gas consumption. From a supply
side, there will be a cap on natural gas prices, as higher prices will
lead to increased production. This is especially true given that there
is significant production capacity that is ready to be 'switched on',
but which is currently offline due to low revenues. However, this
will not prevent US production from expanding, as it will be a part of
the US' carbon reduction plan, helpful in becoming energy
independent and be subservient in meeting the rising demand for
natural gas for LNG export.
U.S. Energy Information Administration raised its estimate for the
domestic natural gas production in 2014, expecting output this year
to be up more than 1 percent from 2013's estimated record high
levels. It is expected that marketed natural gas production in 2014
to rise by 0.74 billion cubic feet per day from 2013 to 71.03 bcf per
day. Growth has mostly been driven by rising production from the
Marcellus shale play in Appalachia, which has more than outpaced
declines in offshore Gulf of Mexico and Haynesville shale output.
Pipeline imports from Canada are expected to continue to decline in
COMMODITY OUTLOOK 2014
®
18®
19
Source: Reuters & SMC Research* Close as on 13th December 2013
2006 2007 2008 2009 2010 2011 2012 2013
Open 2789 2855 3740 2365 3789 4204 5326 5118
High 3760 3812 6375 3850 4270 5456 5728 7785
Low 2737 2370 2053 2100 3350 3636 4546 4737
Close 2856 3721 2312 3787 4198 5336 5110 6118*
1500
2500
3500
4500
5500
6500
7500
8500
Rs./Barrel
Annual Outlook : Natural Gas Annual Commentary : Base Metals
2014, falling to 7.4 bcf (billion cubic feet) daily from the 7.53 bcf
estimated in 2013. EIA slightly raised its estimate for gas
consumption in 2014, but still expects usage to slip 0.8 percent
from 2013 levels to 69.6 bcf per day.
According to EIA “coal used for power generation will rise from 37.4
percent in 2012 to 39.4 percent in 2013 and 40.2 percent in 2014”.
Natural gas which is used for power generation is expected to
decline from 30.4 percent in 2012 to 27.4 percent in 2013 and 26.9
percent in 2014.
Natural gas is also making in-roads in transportation, in the fleet
vehicle market or where vehicles return to the same site to re-fuel.
Furthermore, natural gas will continue to displace oil in factories,
home heating, and displace coal (and other fuels) in electric power
generation. Comparatively cheap, abundant Natural gas is
displacing oil in the United States for several energy uses,
decreasing oil demand.
Weather conditions also dictate the trend of Natural gas in 2014
and the temperatures present in winter and summer induce
heating demand in winter and cooling demand in summers.
Natural gas prices will face resistance near $5.5 in NYMEX and 350
in MCX. While key support is near 190 in MCX and $3.2 in NYMEX.
COMMODITY OUTLOOK 2014
U.S Natural Gas (Weekly) Rig Count
Source: Baker Hughes
Crude Oil & Natural Gas Ratio (NYMEX)
Source: Reuters & SMC Research
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
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600
700
800
900
1000
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Annual Commentary - Base Metals
Base metals prices remained in a volatile range in the year 2013
amid mixed fundamentals. U.S shutdown, debt concerns and fear of
tapering of monetary stimulus kept the prices under pressure while
physical supply tightness in some of the base metals such as Lead
capped the downside. Macroeconomic uncertainties affected the
base metals prices to larger extent in the year 2013. Global PMI
(Purchasing Managers Index) indicators along with ISM (Institute
for Supply Management) survey affected the sentiments. In the year
2013, slow Chinese demand concerns kept the investors on
cautious note while the stimulus measures from the various banks
lend underlying support. However, the overall weakness in the local
currency rupee also aided to the bullish sentiments as it
depreciated more than 17% in 2013.
In the year 2013, lot of events took place like U.S shutdown;
tensions in Syria, North Korea and Egypt took centre stage which
affected the risk sentiment.
Copper, the leader of base metals pack, tested the low of 366 in the
first quarter of 2013 in MCX as stronger greenback kept the prices
downbeat. Copper also diminished lower on growing skepticism
about QE3 after fed minutes. But after the first quarter of 2013
prices appreciated gradually and tested yearly high of above 510 in
the month of August 2013 amid sharp depreciation of local
currency rupee. Thereafter, prices dipped gradually and tested low
below 430 in MCX in the month of November 2013. China copper
imports slowed down in April 2013 as it fell 7.4% from a month ago
to hit a 22 month low, hit by port strikes in Chile and delays to
shipments after the closure of India's top smelter. In the year 2013
mining shutdown has also lead to shortage of metal in physical
market. Jinchuan Group Ltd, China's third largest copper producer,
has shut a 200,000 tonne a year facility due to raw scrap shortage,
which reduced its refined copper output by more than 16 percent in
2013. Consumer morale in the euro zone improved to a two year
high in September 2013, with confidence in the wider European
Union surpassing its long term average for the first time since the
summer of 2011. U.S economic situation improved as consumer
spending rose in July 2013 at its fastest pace in seven months, a sign
of quicker economic growth that could strengthen the case for the
Federal Reserve winding down a major economic stimulus
program.
Aluminum dropped at steady pace in the first four months of 2014
as it tested low of nearly 100 while it witnessed robust growth after
April and tested 133 in August 2013 amid weak local currency. But
after that prices witnessed sharp profit booking and tested low of
nearly 110 in November 2013. Growth concerns in China and ample
stock positions amid decline in crude prices kept the prices on
backfoot. The aluminium industry is struggling with excess
capacity, rising costs and weak prices. United Company RUSAL,
estimated that a fifth of global production outside China is loss
making, even with demand expected to grow 6 to 7 percent in 2013.
Inventory financing and cancelled warrants have lifted aluminium
premiums higher by lengthening the queue to withdraw aluminium
from LME warehouses in 2013.
Battery metal lead also weakened in the first quarter of 2013 till
April amid rising greenback and declining cancelled warrants. But
prices gradually appreciated from low of nearly 106 tested in May to
above 155 in August 2013 amid steep depreciation in local currency
rupee and rise in battery demand coupled with rise in cancelled
warrants. After August 2013, prices dipped lower and traded in the
range of 127-148 for rest of the year. Higher premium of lead
continued to support prices of lead. Lead premium stood around
$260 per tonne in the beginning of September 2013. Total global
refined lead production increased 4.4% to 5.27 million tonnes in
January-June 2013 compared with 5.05 million tonnes in the
cumulative period January-June 2012. The increase in metal output
was on account of heavy increase of 12.4% in production in China.
Meanwhile the global refined lead usage rose by 6.8% to 5.31
million tonnes in January-June 2013. This was higher compared
with 4.97 million tonnes in January -June 2012.
Zinc more or less tailed the movement of lead as it remained
downbeat in the first four months of 2013 but appreciated more
than 40% in subsequent four months testing yearly high of 140 in
the month of August 2013. Strong global equity markets along with
weaker rupee were the key factors behind the escalation in the
prices. But in September 2013 price drifted lower and tested 121
and remained in range till the end of the year. Fear of tapering by Fed
capped the upside in zinc prices while galvanizing demand
supported the prices. According to the ILZSG (International Lead
and Zinc Study Group) data global supply of refined Zinc metal has
exceeded demand by 44000 tonne during Jan-June 2013. Total
reported inventory levels over this period decreased by 123000
tonne.
Like other base metals pack Nickel also nose dived in the first four
months as it fell nearly 16%. Record stockpiles and feeble demand
pushed the prices lower. But prices gradually headed higher and
tested the four digit market of above 1000 in the month August
2013. But due to sudden appreciation in local currency rupee and
fear of tapering Nickel prices dropped lower in the month of
September and gyrated lower for rest of 2013. Lower prices of
Nickel have amounted to shutdown of some small mines in
Australia and Belvedere Resources's Hitura mine in Finland.
COMMODITY OUTLOOK 2014
®
20®
21
Source: Reuters & SMC Research
Yearly price movement of Natural Gas futures (MCX)
* Close as on 13th December 2013
2006 2007 2008 2009 2010 2011 2012 2013
Open 356.20 297.00 294.10 284.00 259.80 203.40 169.10 190.40
High 504.50 358.20 584.40 308.00 273.00 227.70 226.90 276.80
Low 284.40 265.40 265.70 180.50 176.50 169.30 112.50 176.20
Close 299.10 296.70 278.20 258.80 202.70 169.60 190.30 273.30*
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
450.00
500.00
550.00
600.00
650.00
Rs./mmbtu
Annual Outlook : Natural Gas Annual Commentary : Base Metals
2014, falling to 7.4 bcf (billion cubic feet) daily from the 7.53 bcf
estimated in 2013. EIA slightly raised its estimate for gas
consumption in 2014, but still expects usage to slip 0.8 percent
from 2013 levels to 69.6 bcf per day.
According to EIA “coal used for power generation will rise from 37.4
percent in 2012 to 39.4 percent in 2013 and 40.2 percent in 2014”.
Natural gas which is used for power generation is expected to
decline from 30.4 percent in 2012 to 27.4 percent in 2013 and 26.9
percent in 2014.
Natural gas is also making in-roads in transportation, in the fleet
vehicle market or where vehicles return to the same site to re-fuel.
Furthermore, natural gas will continue to displace oil in factories,
home heating, and displace coal (and other fuels) in electric power
generation. Comparatively cheap, abundant Natural gas is
displacing oil in the United States for several energy uses,
decreasing oil demand.
Weather conditions also dictate the trend of Natural gas in 2014
and the temperatures present in winter and summer induce
heating demand in winter and cooling demand in summers.
Natural gas prices will face resistance near $5.5 in NYMEX and 350
in MCX. While key support is near 190 in MCX and $3.2 in NYMEX.
COMMODITY OUTLOOK 2014
U.S Natural Gas (Weekly) Rig Count
Source: Baker Hughes
Crude Oil & Natural Gas Ratio (NYMEX)
Source: Reuters & SMC Research
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
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300
400
500
600
700
800
900
1000
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Annual Commentary - Base Metals
Base metals prices remained in a volatile range in the year 2013
amid mixed fundamentals. U.S shutdown, debt concerns and fear of
tapering of monetary stimulus kept the prices under pressure while
physical supply tightness in some of the base metals such as Lead
capped the downside. Macroeconomic uncertainties affected the
base metals prices to larger extent in the year 2013. Global PMI
(Purchasing Managers Index) indicators along with ISM (Institute
for Supply Management) survey affected the sentiments. In the year
2013, slow Chinese demand concerns kept the investors on
cautious note while the stimulus measures from the various banks
lend underlying support. However, the overall weakness in the local
currency rupee also aided to the bullish sentiments as it
depreciated more than 17% in 2013.
In the year 2013, lot of events took place like U.S shutdown;
tensions in Syria, North Korea and Egypt took centre stage which
affected the risk sentiment.
Copper, the leader of base metals pack, tested the low of 366 in the
first quarter of 2013 in MCX as stronger greenback kept the prices
downbeat. Copper also diminished lower on growing skepticism
about QE3 after fed minutes. But after the first quarter of 2013
prices appreciated gradually and tested yearly high of above 510 in
the month of August 2013 amid sharp depreciation of local
currency rupee. Thereafter, prices dipped gradually and tested low
below 430 in MCX in the month of November 2013. China copper
imports slowed down in April 2013 as it fell 7.4% from a month ago
to hit a 22 month low, hit by port strikes in Chile and delays to
shipments after the closure of India's top smelter. In the year 2013
mining shutdown has also lead to shortage of metal in physical
market. Jinchuan Group Ltd, China's third largest copper producer,
has shut a 200,000 tonne a year facility due to raw scrap shortage,
which reduced its refined copper output by more than 16 percent in
2013. Consumer morale in the euro zone improved to a two year
high in September 2013, with confidence in the wider European
Union surpassing its long term average for the first time since the
summer of 2011. U.S economic situation improved as consumer
spending rose in July 2013 at its fastest pace in seven months, a sign
of quicker economic growth that could strengthen the case for the
Federal Reserve winding down a major economic stimulus
program.
Aluminum dropped at steady pace in the first four months of 2014
as it tested low of nearly 100 while it witnessed robust growth after
April and tested 133 in August 2013 amid weak local currency. But
after that prices witnessed sharp profit booking and tested low of
nearly 110 in November 2013. Growth concerns in China and ample
stock positions amid decline in crude prices kept the prices on
backfoot. The aluminium industry is struggling with excess
capacity, rising costs and weak prices. United Company RUSAL,
estimated that a fifth of global production outside China is loss
making, even with demand expected to grow 6 to 7 percent in 2013.
Inventory financing and cancelled warrants have lifted aluminium
premiums higher by lengthening the queue to withdraw aluminium
from LME warehouses in 2013.
Battery metal lead also weakened in the first quarter of 2013 till
April amid rising greenback and declining cancelled warrants. But
prices gradually appreciated from low of nearly 106 tested in May to
above 155 in August 2013 amid steep depreciation in local currency
rupee and rise in battery demand coupled with rise in cancelled
warrants. After August 2013, prices dipped lower and traded in the
range of 127-148 for rest of the year. Higher premium of lead
continued to support prices of lead. Lead premium stood around
$260 per tonne in the beginning of September 2013. Total global
refined lead production increased 4.4% to 5.27 million tonnes in
January-June 2013 compared with 5.05 million tonnes in the
cumulative period January-June 2012. The increase in metal output
was on account of heavy increase of 12.4% in production in China.
Meanwhile the global refined lead usage rose by 6.8% to 5.31
million tonnes in January-June 2013. This was higher compared
with 4.97 million tonnes in January -June 2012.
Zinc more or less tailed the movement of lead as it remained
downbeat in the first four months of 2013 but appreciated more
than 40% in subsequent four months testing yearly high of 140 in
the month of August 2013. Strong global equity markets along with
weaker rupee were the key factors behind the escalation in the
prices. But in September 2013 price drifted lower and tested 121
and remained in range till the end of the year. Fear of tapering by Fed
capped the upside in zinc prices while galvanizing demand
supported the prices. According to the ILZSG (International Lead
and Zinc Study Group) data global supply of refined Zinc metal has
exceeded demand by 44000 tonne during Jan-June 2013. Total
reported inventory levels over this period decreased by 123000
tonne.
Like other base metals pack Nickel also nose dived in the first four
months as it fell nearly 16%. Record stockpiles and feeble demand
pushed the prices lower. But prices gradually headed higher and
tested the four digit market of above 1000 in the month August
2013. But due to sudden appreciation in local currency rupee and
fear of tapering Nickel prices dropped lower in the month of
September and gyrated lower for rest of 2013. Lower prices of
Nickel have amounted to shutdown of some small mines in
Australia and Belvedere Resources's Hitura mine in Finland.
COMMODITY OUTLOOK 2014
®
20®
21
Source: Reuters & SMC Research
Yearly price movement of Natural Gas futures (MCX)
* Close as on 13th December 2013
2006 2007 2008 2009 2010 2011 2012 2013
Open 356.20 297.00 294.10 284.00 259.80 203.40 169.10 190.40
High 504.50 358.20 584.40 308.00 273.00 227.70 226.90 276.80
Low 284.40 265.40 265.70 180.50 176.50 169.30 112.50 176.20
Close 299.10 296.70 278.20 258.80 202.70 169.60 190.30 273.30*
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
450.00
500.00
550.00
600.00
650.00
Rs./mmbtu
Annual Outlook : Copper Annual Outlook : Nickel
Annual Outlook
Copper Range: MCX: Rs 380-540
LME: $6000-8300
The copper market often has been said to own a PhD in economics,
because its performance frequently forecasted the strength of the
global economy. Global economy will face uncertain times in the
year 2014, so will the copper.
The Federal Reserve action will weigh in this year as it is
approaching a phase out of its $85 billion-a-month bond buying
program. In anticipation, long term interest rates have already risen
in 2013 by about a percentage point, putting a dampener on
mortgage applications.
The economic situation in China and U.S housing and employment
situation will hold centre stage going forward in 2014. In U.S
government shutdown contributed to slower GDP growth about
1.7% in 2013, but the picture could brighten in 2014. It is expected
that by mid-2014, quarterly growth should reach an annualized
pace of 3%, making the economy more durable in the face of
challenges that include policy uncertainty at home as well as soft
growth among major trade partners. Then, the U.S economy should
be able to generate 200,000 or more jobs a month. In China,
economy is slowly limping back to normal as in the calendar quarter
ended Sept. 30 2013.
China will continue to be the key price driver of copper prices as it is
quite amazing fact that China, primed by government spending to
boost growth, will need enough copper every month to circle the
globe more than 100 times. Copper use in China jumped nearly 8
percent to a record 8.833 million metric tonnes in 2013. As per
customs data, shipments jumped 32 percent from August 2013 to
347,305 metric tonne in September 2013 the highest level since
February 2012.
Chinese monetary measure in 2014 will also affect the red metal
prices as China tightened the money supply and its banks tripled
the amount of bad loans of slowing metal consumption demand.
It is expected that world copper supplies will exceed demand by
about 340,000 tonnes through 2015 thereby pressurizing the
prices. Supply can increase by 1 million tonne in 2014 and an
additional of 800,000 tonnes in 2015.
It is expected that increase in inventories can fuel concern that
demand won't be strong enough to whittle away excess supplies
amid the outlook for increased mine production. Meanwhile,
stockpiles tracked by the London Metal Exchange rose by 49
percent in 2013. According to Glencore Xstrata Plc, the metals
producer and commodity trader, quarterly copper output surged by
34 percent as African mines added to volumes. The metals group is
saddled with significant surpluses going forward. Even if there is a
stronger demand going forward in 2014 that will likely reduce
some of this excess, it would not be strong enough to nudge the
markets toward a balanced or a deficit type situation. If one goes
only by the level of copper stocks held in the exchange warehouses,
which it defines as those belonging to the LME (London Metal
Exchange), SHFE (Shanghai Futures Exchange) and COMEX
(Chicago Mercantile Exchange), then it does look like the market is
in surplus, as these stocks have risen by about 110,000 tonnes in
2013. Stocks of copper held at bonded warehouses in China peaked
at somewhere between 1 million and 1.1 million tonnes in January
2013, and have fallen to a low of little more than 300,000 tonnes till
Nov 2013. And the netting off 110,000 tonnes of higher exchange
stocks versus 800,000 tonnes of lower bonded stocks suggests a
substantial deficit.
China housing bubble has grown by wide margin as small two
bedroom Beijing flat now costs the average of 32-years' salary, or
$330,000 dollars. China's property tycoons are uneasy and in fear
that the boom has become a bubble at risk of bursting.
Furthermore, copper demand from copper ETF can support the
prices in 2014. BlackRock Inc., performed very well, which was
listed as copper backed exchange traded fund in 2013. Other copper
backed funds are iPath Dow Jones UBS Copper Subindex which
showed good investor participation.
As in 2013, copper prices in this year also can trade on volatile path.
Strike by the various mines can keep the prices well supported. It is
expected that Copper prices will swing to the tunes of sentiments
pertaining to the action taken by US Federal Reserve regarding QE3
in 2014. In Dec 18, 2013 meeting, Fed cut its monthly bond
purchases from $85 billion to $75 billion.
Copper prices may find support near 380 in MCX while 540 will act
as a resistance on the domestic bourses. In LME, prices can get
support near 6000 while 8300 can act as a resistance.
COMMODITY OUTLOOK 2014
®
22
Yearly price movement of Copper futures (MCX)
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 203.50 285.60 265.95 155.00 343.95 439.30 405.95 444.00
High 397.90 345.60 387.40 347.20 439.80 466.20 463.00 512.70Low 199.90 235.00 138.55 150.85 284.10 332.40 397.00 366.40Close 285.60 266.00 152.75 344.00 439.50 406.00 443.75 461.75*
0.00
100.00
200.00
300.00
400.00
500.00
600.00
Rs./Kg
* Close as on 13th December 2013
Annual Outlook
Nickel Range: MCX: Rs 750-1150
LME: $12000-18000
Nickel, which was the underperformer among other base metals
pack in 2013, can witness some buying in 2014 as Indonesia's plan
to ban the export of Nickel ore in 2014.
About 30 percent of nickel mines in Indonesia are losing money at
current prices. Indonesia accounted for 28 percent of global Nickel
supply in 2013. Vale Indonesia produces nickel in matte at its
smelter in Sulawesi, and ships ore overseas.
Indonesia is seeking to boost the value of commodity sales, and
while a blanket ban is mandated by the 2009 Mining Law, the
government may exempt companies that are operating or planning
to build processing plants in 2014.
Nickel is expected to be in surplus to the tune of 70,000 tonnes in
2013 slightly narrower than the 75,000 tonnes surplus in 2012
offsetting what it sees as a demand increase of 7% in 2013.
The wild card for Nickel in 2014 is an Indonesian law that is set to
ban ore exports by producers starting this year. The law requires
mineral ores to be processed domestically before being exported to
encourage foreign investment and boost local miners' profits.
According to BNP Paribas “enforcement of the ban on ore exports
could either boost prices in 2014 or have a negligible effect,
depending on Chinese producers' response.” Chinese processors of
nickel pig iron, which is a cheaper version of nickel compared with
primary nickel, cut back on production, would necessitate
increased imports of primary nickel to the Middle Kingdom, which
can boost Nickel prices. But if Chinese nickel pig iron production
continues apace, with producers relying on stocks of ore they have
been hoarding since the beginning of 2013, the impact of
Indonesia's ban on global prices may be muted. As per Glencore
Xstrata Plc “Indonesia will export 60 million tonnes of nickel ore in
2013 from 45 million tonnes in 2012 due to record shipments to
China”
China has built up nickel ore stocks as a buffer against a ban
equivalent to around six-10 months of consumption, both at ports
and at nickel pig iron production facilities.
Customs data from China showed that nickel imports from
Indonesia totaled 56.9 million tonnes in the January-October 2013
period, up 41% on as compared to same period in 2012.
Mining closure across the globe amid reduced prices can give some
support in 2014. Mining majors such as Glencore Xstrata have
suspended mining operations at Folcando in the Dominican
Republic in 2013. The capacity of that mine is around 16000 tonne
per annum. Norilsk Nickel, the world's largest nickel producer has
also made its intentions very clear in unveiling a new strategy on
concentrating on nickel mines only in Russia and deciding to exit its
nickel mines in other countries in 2014.
Most of the nickel market surplus has been contributed by the
Chinese nickel pig iron industry. China's nickel production also
remained higher at 196,896 tonnes for the third quarter of 2013
amidst rising stock piles. After the ban is enforced in Indonesia
about 430000 tonnes per annum of nickel in ore will be removed
from the traded ore market. Chinese Nickel Pig Iron (NPI) smelters,
which are heavily reliant on Indonesian saprolitic ore, will lose their
primary source for feedstock. As a result many Chinese NPI
smelters will be forced to shut, reducing finished nickel supply and
boosting prices.
Customs data from China show nickel imports from Indonesia
totaled 56.9 million tonnes in the January-October period in 2013
up 41% on year. Meanwhile, nickel prices may tend to get some
support from the robust demand from the stainless steel sector and
potential supply shortage from the Indonesian export ban in 2014.
Nickel prices have key resistance of 1150 in MCX and $18000 in
LME while 750 are the key support in MCX and $12000 in LME.
COMMODITY OUTLOOK 2014
®
23
Yearly price movement of Nickel futures (MCX)
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 663 1505 1040.5 576 878.7 1116.2 992.5 945
High 1640 2253.9 1416 1022.4 1224.7 1327.8 1086.8 1004.8
Low 566 998 442.3 462 795.5 845.3 848 787.5
Close 1503.5 1017.5 523.6 863.1 1111.8 991.2 936.4 877.2*
200
500
800
1100
1400
1700
2000
2300
* Close as on 13th December 2013
Rs./Kg
Annual Outlook : Copper Annual Outlook : Nickel
Annual Outlook
Copper Range: MCX: Rs 380-540
LME: $6000-8300
The copper market often has been said to own a PhD in economics,
because its performance frequently forecasted the strength of the
global economy. Global economy will face uncertain times in the
year 2014, so will the copper.
The Federal Reserve action will weigh in this year as it is
approaching a phase out of its $85 billion-a-month bond buying
program. In anticipation, long term interest rates have already risen
in 2013 by about a percentage point, putting a dampener on
mortgage applications.
The economic situation in China and U.S housing and employment
situation will hold centre stage going forward in 2014. In U.S
government shutdown contributed to slower GDP growth about
1.7% in 2013, but the picture could brighten in 2014. It is expected
that by mid-2014, quarterly growth should reach an annualized
pace of 3%, making the economy more durable in the face of
challenges that include policy uncertainty at home as well as soft
growth among major trade partners. Then, the U.S economy should
be able to generate 200,000 or more jobs a month. In China,
economy is slowly limping back to normal as in the calendar quarter
ended Sept. 30 2013.
China will continue to be the key price driver of copper prices as it is
quite amazing fact that China, primed by government spending to
boost growth, will need enough copper every month to circle the
globe more than 100 times. Copper use in China jumped nearly 8
percent to a record 8.833 million metric tonnes in 2013. As per
customs data, shipments jumped 32 percent from August 2013 to
347,305 metric tonne in September 2013 the highest level since
February 2012.
Chinese monetary measure in 2014 will also affect the red metal
prices as China tightened the money supply and its banks tripled
the amount of bad loans of slowing metal consumption demand.
It is expected that world copper supplies will exceed demand by
about 340,000 tonnes through 2015 thereby pressurizing the
prices. Supply can increase by 1 million tonne in 2014 and an
additional of 800,000 tonnes in 2015.
It is expected that increase in inventories can fuel concern that
demand won't be strong enough to whittle away excess supplies
amid the outlook for increased mine production. Meanwhile,
stockpiles tracked by the London Metal Exchange rose by 49
percent in 2013. According to Glencore Xstrata Plc, the metals
producer and commodity trader, quarterly copper output surged by
34 percent as African mines added to volumes. The metals group is
saddled with significant surpluses going forward. Even if there is a
stronger demand going forward in 2014 that will likely reduce
some of this excess, it would not be strong enough to nudge the
markets toward a balanced or a deficit type situation. If one goes
only by the level of copper stocks held in the exchange warehouses,
which it defines as those belonging to the LME (London Metal
Exchange), SHFE (Shanghai Futures Exchange) and COMEX
(Chicago Mercantile Exchange), then it does look like the market is
in surplus, as these stocks have risen by about 110,000 tonnes in
2013. Stocks of copper held at bonded warehouses in China peaked
at somewhere between 1 million and 1.1 million tonnes in January
2013, and have fallen to a low of little more than 300,000 tonnes till
Nov 2013. And the netting off 110,000 tonnes of higher exchange
stocks versus 800,000 tonnes of lower bonded stocks suggests a
substantial deficit.
China housing bubble has grown by wide margin as small two
bedroom Beijing flat now costs the average of 32-years' salary, or
$330,000 dollars. China's property tycoons are uneasy and in fear
that the boom has become a bubble at risk of bursting.
Furthermore, copper demand from copper ETF can support the
prices in 2014. BlackRock Inc., performed very well, which was
listed as copper backed exchange traded fund in 2013. Other copper
backed funds are iPath Dow Jones UBS Copper Subindex which
showed good investor participation.
As in 2013, copper prices in this year also can trade on volatile path.
Strike by the various mines can keep the prices well supported. It is
expected that Copper prices will swing to the tunes of sentiments
pertaining to the action taken by US Federal Reserve regarding QE3
in 2014. In Dec 18, 2013 meeting, Fed cut its monthly bond
purchases from $85 billion to $75 billion.
Copper prices may find support near 380 in MCX while 540 will act
as a resistance on the domestic bourses. In LME, prices can get
support near 6000 while 8300 can act as a resistance.
COMMODITY OUTLOOK 2014
®
22
Yearly price movement of Copper futures (MCX)
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 203.50 285.60 265.95 155.00 343.95 439.30 405.95 444.00
High 397.90 345.60 387.40 347.20 439.80 466.20 463.00 512.70Low 199.90 235.00 138.55 150.85 284.10 332.40 397.00 366.40Close 285.60 266.00 152.75 344.00 439.50 406.00 443.75 461.75*
0.00
100.00
200.00
300.00
400.00
500.00
600.00
Rs./Kg
* Close as on 13th December 2013
Annual Outlook
Nickel Range: MCX: Rs 750-1150
LME: $12000-18000
Nickel, which was the underperformer among other base metals
pack in 2013, can witness some buying in 2014 as Indonesia's plan
to ban the export of Nickel ore in 2014.
About 30 percent of nickel mines in Indonesia are losing money at
current prices. Indonesia accounted for 28 percent of global Nickel
supply in 2013. Vale Indonesia produces nickel in matte at its
smelter in Sulawesi, and ships ore overseas.
Indonesia is seeking to boost the value of commodity sales, and
while a blanket ban is mandated by the 2009 Mining Law, the
government may exempt companies that are operating or planning
to build processing plants in 2014.
Nickel is expected to be in surplus to the tune of 70,000 tonnes in
2013 slightly narrower than the 75,000 tonnes surplus in 2012
offsetting what it sees as a demand increase of 7% in 2013.
The wild card for Nickel in 2014 is an Indonesian law that is set to
ban ore exports by producers starting this year. The law requires
mineral ores to be processed domestically before being exported to
encourage foreign investment and boost local miners' profits.
According to BNP Paribas “enforcement of the ban on ore exports
could either boost prices in 2014 or have a negligible effect,
depending on Chinese producers' response.” Chinese processors of
nickel pig iron, which is a cheaper version of nickel compared with
primary nickel, cut back on production, would necessitate
increased imports of primary nickel to the Middle Kingdom, which
can boost Nickel prices. But if Chinese nickel pig iron production
continues apace, with producers relying on stocks of ore they have
been hoarding since the beginning of 2013, the impact of
Indonesia's ban on global prices may be muted. As per Glencore
Xstrata Plc “Indonesia will export 60 million tonnes of nickel ore in
2013 from 45 million tonnes in 2012 due to record shipments to
China”
China has built up nickel ore stocks as a buffer against a ban
equivalent to around six-10 months of consumption, both at ports
and at nickel pig iron production facilities.
Customs data from China showed that nickel imports from
Indonesia totaled 56.9 million tonnes in the January-October 2013
period, up 41% on as compared to same period in 2012.
Mining closure across the globe amid reduced prices can give some
support in 2014. Mining majors such as Glencore Xstrata have
suspended mining operations at Folcando in the Dominican
Republic in 2013. The capacity of that mine is around 16000 tonne
per annum. Norilsk Nickel, the world's largest nickel producer has
also made its intentions very clear in unveiling a new strategy on
concentrating on nickel mines only in Russia and deciding to exit its
nickel mines in other countries in 2014.
Most of the nickel market surplus has been contributed by the
Chinese nickel pig iron industry. China's nickel production also
remained higher at 196,896 tonnes for the third quarter of 2013
amidst rising stock piles. After the ban is enforced in Indonesia
about 430000 tonnes per annum of nickel in ore will be removed
from the traded ore market. Chinese Nickel Pig Iron (NPI) smelters,
which are heavily reliant on Indonesian saprolitic ore, will lose their
primary source for feedstock. As a result many Chinese NPI
smelters will be forced to shut, reducing finished nickel supply and
boosting prices.
Customs data from China show nickel imports from Indonesia
totaled 56.9 million tonnes in the January-October period in 2013
up 41% on year. Meanwhile, nickel prices may tend to get some
support from the robust demand from the stainless steel sector and
potential supply shortage from the Indonesian export ban in 2014.
Nickel prices have key resistance of 1150 in MCX and $18000 in
LME while 750 are the key support in MCX and $12000 in LME.
COMMODITY OUTLOOK 2014
®
23
Yearly price movement of Nickel futures (MCX)
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 663 1505 1040.5 576 878.7 1116.2 992.5 945
High 1640 2253.9 1416 1022.4 1224.7 1327.8 1086.8 1004.8
Low 566 998 442.3 462 795.5 845.3 848 787.5
Close 1503.5 1017.5 523.6 863.1 1111.8 991.2 936.4 877.2*
200
500
800
1100
1400
1700
2000
2300
* Close as on 13th December 2013
Rs./Kg
Annual Outlook : Zinc Annual Outlook : Lead
Annual Outlook
Zinc Range: MCX: Rs 100-150
LME: $1750-2400
Zinc, the galvanizing metal, which was quite volatile in the year gone by can witness choppy movement with the positive momentum in the year 2014. Demand from the construction and auto sectors and the growth in steel sector will impact the prices in 2014.
Tightening global zinc mine production is expected to create a bullish trend in zinc prices in 2014.
Mining shutdown is also likely to affect the zinc prices going forward in 2014. Production in the Glencore's zinc mine declined by 12% (YoY) due to the closure of two big mines namely Perseverance and Brunswick last year. The two mines are expected to reduce a total of 300000 tonnes per year from the world zinc supply.
Demand from construction, transport, consumer goods, electrical appliances and general engineering will give direction to Zinc prices in 2014. Meanwhile in 2014, the US debt problems along with pace of recovery in US and China are likely to affect the price movement of Zinc.
Zinc inventory positions in LME and other warehouse like New Orleans used to affect prices in 2012 but as many inventories are locked in the financial deals as in 2013 so they do not have much impact on prices as earlier. Inventories of the metal continue to show downward trend in LME warehouses with zinc stocks down by 160,000 tonne in 2013. However, the interesting point is that industry players suggest that some 240,000 tonne of metal is probably laying in warehouses not controlled by LME. LME stocks are concentrated to a major extent at a single centre, New Orleans. The total inventory sitting at New Orleans is to the tune of 396,000 tonnes forming almost 80% of the entire non cancelled inventories in LME warehouses. In mid October 2013 stocks at New Orleans registered a sharp rise of 75,000 tonne in a single day. Usually such a move would have had profound impact on prices but nothing much happened to the prices, suggesting that the role of inventory
movement to gauge the demand and supply for the metal is diminishing as many times the flow of the metal is simply to lock in the material for financing deals.
According to the International lead and zinc study group “Chinese zinc demand would rise by 7.7% in 2013 and that net imports of refined zinc metal into China would remain at just over half a million tonnes”. In 2014, it is predicted that Chinese zinc usage would increase by a further 7%.
European demand is forecasted to fall for the second successive year in 2013 although, at 0.8%, the extent of the reduction would be small. In 2014, an expected 3.8% rise would be primarily due to anticipated growth in Belgium, Italy and Poland.
In the United States, it is expected that demand would increase by 7.1% in 2013 and by 1.2% in 2014. Elsewhere, demand is forecasted to rise in Brazil, India and Turkey and to remain stable in Japan and the Republic of Korea.
According to International Lead Zinc Study Group “growth in the global demand for refined zinc metal is expected to increase in 2013 and continue in 2014 with a rise of 4.8% to 12.89 million tonnes and 5% to 13.54 million tonnes respectively.
In 2014, global zinc consumption is expected to rise as a result of urbanization plans, infrastructure projects and strong production of cars.
Silver-Zinc vehicle SLI batteries, which have 45 percent more power and a 30-percent longer life, are also commercially available and competitively priced. So demand for SLI batteries can give support to Zinc demand in 2014.
On the supply side Xtsrata's Brunswick and Perseverance mines have been closed in 2013 with Vedanta expected to close Lisheen mine in 2014. Other smaller mines are expected to follow suit putting pressure on supply side in 2014 thereby supporting the prices.
Zinc will face key support of 100 in MCX and $1750 at LME while key resistance will be 150 in MCX and $2400 in LME.
COMMODITY OUTLOOK 2014
®
24
Yearly price movement of Zinc futures (MCX) MCX Lead Zinc Spread
Source: Reuters & SMC Research Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 150.85 191.60 93.35 58.60 118.70 109.95 98.30 113.00
High 208.30 191.90 116.80 120.70 123.20 115.90 115.20 136.90
Low 118.05 86.00 49.85 52.30 74.35 86.10 96.30 97.40
Close 191.25 90.15 54.30 120.00 108.85 98.45 111.35 122.95*
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
220.00
* Close as on 13th December 2013
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
1-J
an
-11
1-M
ar-
11
1-M
ay
-11
1-J
ul-
11
1-S
ep
-11
1-N
ov
-11
1-J
an
-12
1-M
ar-
12
1-M
ay
-12
1-J
ul-
12
1-S
ep
-12
1-N
ov
-12
1-J
an
-13
1-M
ar-
13
1-M
ay
-13
1-J
ul-
13
1-S
ep
-13
1-N
ov
-13
COMMODITY OUTLOOK 2014
®
25
Annual outlook
Lead Range: MCX: Rs 110-160
LME: $1750-2650
Battery metal lead may remain on firm footing in 2014 amid
increased demand and higher premium. In 2014, outlook for the
lead market is expected to remain positive, with good demand
growth from the industrial battery sector and for Sealed Lead Acid
batteries (SLA), which are used to power e-bikes. Lead is majorly
used in car batteries, mobiles and e bikes. Its corrosion resistant
quality makes it suitable to store sulfuric acid. Due to its
malleability and anti corrosion characteristics it is also used in
building construction. The regime to follow carbon emission norms
has also hit lead production thereby supporting prices.
Replacement battery demand is growing in India along with that
the power shortages has increased options for alternative energy.
Steady growth in automobile battery demand in Asia Pacific,
especially India and China are expected to keep the lead prices well
supported in 2014.
Winter demand often gives support to the Lead prices. Northern
Hemisphere winter is expected to drive up demand for the
industrial metal. Lead is largely used in the automobile batteries,
which often require replacement in colder weather.
At the same time, the world's major economies, such as the U.S. and
Germany, are recovering, which could mean more rivalry for limited
lead supplies.
Dwindling supplies due to mining closure could give further
support to the prices going forward in 2014. Key mines like
Glencore Xstrata's Brunswick operation in Canada have been closed
in 2013 and aren't being reopened. The last primary U.S. lead
smelter, Doe Run's Herculaneum, Mo., site, will close in January
2014, after the miner decided that upgrades needed to meet
environmental laws weren't financially viable. Lead is often mined
as a byproduct of zinc, but as closed mines are replaced, there's
much less of the metal on the radar for minerals producers. New
facilities like Glencore's Perkoa project in Burkina Faso are heavily
skewed toward zinc production.
According to the International Lead and Zinc Study Group, a Lisbon
based intergovernmental organization “supplies fell short of
demand by 46,000 metric tonnes in the first nine months of 2013
but ended 2013 with an estimated small surplus and in 2014, the
group expects demand to exceed supply for the first time in five
years”
About 80% of lead demand comes from battery manufacturers. In
addition, Japanese and U.S. auto makers are selling more vehicles,
which means greater demand for new batteries. But the real driver
for lead is likely to be no surprise is China, as the country's rising
number of cars and electric powered bicycles bolster demand for
batteries. China's car sales hit their highest volume in nine months
in October 2013.
U.S demand for primary and secondary batteries is expected to
increase by 4.2 percent per year to $17.1 billion in 2017,
accelerating from the 2007-2012 period. Gains will be driven by an
upturn in motor vehicle and other durable goods output, and
supported by stronger personal consumption expenditures
growth. Motor vehicles in US will post the largest increases in dollar
terms as motor vehicle production rises after more than a decade of
decline. It will also be the fastest growing market in percentage
terms, with overall battery demand bolstered by expanding
production and sales of hybrid/electric vehicles (HEVs). Backup
power supplies will register the next fastest demand gains, boosted
by a pickup in nonresidential fixed investment, especially for
wireless device transmission towers and related facilities, and by
continuing concerns about the perceived vulnerability of the
nation's power grid in US.
With greater demand and restricted supplies the prices of battery
metal Lead can show buoyancy in 2014.
Lead Zinc spread may expand further and widen towards 18 in MCX
as Lead prices can outperform Zinc amid strong fundamentals in
2014. Lead has a key support of 110 in MCX and $1750 in LME and
key resistance of 160 in MCX and $2650 in LME.
Yearly price movement of Lead futures (MCX)
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 43.65 74.25 101.30 49.35 113.50 115.40 107.75 127.15
High 80.95 154.40 140.70 121.50 122.00 135.40 128.20 155.40
Low 42.00 69.00 40.50 47.80 72.55 88.50 99.10 104.30
Close 74.25 99.80 45.95 111.65 115.65 107.65 127.75 133.55*
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
* Close as on 13th December 2013
Rs./Kg Rs./Kg
Annual Outlook : Zinc Annual Outlook : Lead
Annual Outlook
Zinc Range: MCX: Rs 100-150
LME: $1750-2400
Zinc, the galvanizing metal, which was quite volatile in the year gone by can witness choppy movement with the positive momentum in the year 2014. Demand from the construction and auto sectors and the growth in steel sector will impact the prices in 2014.
Tightening global zinc mine production is expected to create a bullish trend in zinc prices in 2014.
Mining shutdown is also likely to affect the zinc prices going forward in 2014. Production in the Glencore's zinc mine declined by 12% (YoY) due to the closure of two big mines namely Perseverance and Brunswick last year. The two mines are expected to reduce a total of 300000 tonnes per year from the world zinc supply.
Demand from construction, transport, consumer goods, electrical appliances and general engineering will give direction to Zinc prices in 2014. Meanwhile in 2014, the US debt problems along with pace of recovery in US and China are likely to affect the price movement of Zinc.
Zinc inventory positions in LME and other warehouse like New Orleans used to affect prices in 2012 but as many inventories are locked in the financial deals as in 2013 so they do not have much impact on prices as earlier. Inventories of the metal continue to show downward trend in LME warehouses with zinc stocks down by 160,000 tonne in 2013. However, the interesting point is that industry players suggest that some 240,000 tonne of metal is probably laying in warehouses not controlled by LME. LME stocks are concentrated to a major extent at a single centre, New Orleans. The total inventory sitting at New Orleans is to the tune of 396,000 tonnes forming almost 80% of the entire non cancelled inventories in LME warehouses. In mid October 2013 stocks at New Orleans registered a sharp rise of 75,000 tonne in a single day. Usually such a move would have had profound impact on prices but nothing much happened to the prices, suggesting that the role of inventory
movement to gauge the demand and supply for the metal is diminishing as many times the flow of the metal is simply to lock in the material for financing deals.
According to the International lead and zinc study group “Chinese zinc demand would rise by 7.7% in 2013 and that net imports of refined zinc metal into China would remain at just over half a million tonnes”. In 2014, it is predicted that Chinese zinc usage would increase by a further 7%.
European demand is forecasted to fall for the second successive year in 2013 although, at 0.8%, the extent of the reduction would be small. In 2014, an expected 3.8% rise would be primarily due to anticipated growth in Belgium, Italy and Poland.
In the United States, it is expected that demand would increase by 7.1% in 2013 and by 1.2% in 2014. Elsewhere, demand is forecasted to rise in Brazil, India and Turkey and to remain stable in Japan and the Republic of Korea.
According to International Lead Zinc Study Group “growth in the global demand for refined zinc metal is expected to increase in 2013 and continue in 2014 with a rise of 4.8% to 12.89 million tonnes and 5% to 13.54 million tonnes respectively.
In 2014, global zinc consumption is expected to rise as a result of urbanization plans, infrastructure projects and strong production of cars.
Silver-Zinc vehicle SLI batteries, which have 45 percent more power and a 30-percent longer life, are also commercially available and competitively priced. So demand for SLI batteries can give support to Zinc demand in 2014.
On the supply side Xtsrata's Brunswick and Perseverance mines have been closed in 2013 with Vedanta expected to close Lisheen mine in 2014. Other smaller mines are expected to follow suit putting pressure on supply side in 2014 thereby supporting the prices.
Zinc will face key support of 100 in MCX and $1750 at LME while key resistance will be 150 in MCX and $2400 in LME.
COMMODITY OUTLOOK 2014
®
24
Yearly price movement of Zinc futures (MCX) MCX Lead Zinc Spread
Source: Reuters & SMC Research Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 150.85 191.60 93.35 58.60 118.70 109.95 98.30 113.00
High 208.30 191.90 116.80 120.70 123.20 115.90 115.20 136.90
Low 118.05 86.00 49.85 52.30 74.35 86.10 96.30 97.40
Close 191.25 90.15 54.30 120.00 108.85 98.45 111.35 122.95*
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
220.00
* Close as on 13th December 2013
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
1-J
an
-11
1-M
ar-
11
1-M
ay
-11
1-J
ul-
11
1-S
ep
-11
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-11
1-J
an
-12
1-M
ar-
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1-M
ay
-12
1-J
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1-M
ar-
13
1-M
ay
-13
1-J
ul-
13
1-S
ep
-13
1-N
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-13
COMMODITY OUTLOOK 2014
®
25
Annual outlook
Lead Range: MCX: Rs 110-160
LME: $1750-2650
Battery metal lead may remain on firm footing in 2014 amid
increased demand and higher premium. In 2014, outlook for the
lead market is expected to remain positive, with good demand
growth from the industrial battery sector and for Sealed Lead Acid
batteries (SLA), which are used to power e-bikes. Lead is majorly
used in car batteries, mobiles and e bikes. Its corrosion resistant
quality makes it suitable to store sulfuric acid. Due to its
malleability and anti corrosion characteristics it is also used in
building construction. The regime to follow carbon emission norms
has also hit lead production thereby supporting prices.
Replacement battery demand is growing in India along with that
the power shortages has increased options for alternative energy.
Steady growth in automobile battery demand in Asia Pacific,
especially India and China are expected to keep the lead prices well
supported in 2014.
Winter demand often gives support to the Lead prices. Northern
Hemisphere winter is expected to drive up demand for the
industrial metal. Lead is largely used in the automobile batteries,
which often require replacement in colder weather.
At the same time, the world's major economies, such as the U.S. and
Germany, are recovering, which could mean more rivalry for limited
lead supplies.
Dwindling supplies due to mining closure could give further
support to the prices going forward in 2014. Key mines like
Glencore Xstrata's Brunswick operation in Canada have been closed
in 2013 and aren't being reopened. The last primary U.S. lead
smelter, Doe Run's Herculaneum, Mo., site, will close in January
2014, after the miner decided that upgrades needed to meet
environmental laws weren't financially viable. Lead is often mined
as a byproduct of zinc, but as closed mines are replaced, there's
much less of the metal on the radar for minerals producers. New
facilities like Glencore's Perkoa project in Burkina Faso are heavily
skewed toward zinc production.
According to the International Lead and Zinc Study Group, a Lisbon
based intergovernmental organization “supplies fell short of
demand by 46,000 metric tonnes in the first nine months of 2013
but ended 2013 with an estimated small surplus and in 2014, the
group expects demand to exceed supply for the first time in five
years”
About 80% of lead demand comes from battery manufacturers. In
addition, Japanese and U.S. auto makers are selling more vehicles,
which means greater demand for new batteries. But the real driver
for lead is likely to be no surprise is China, as the country's rising
number of cars and electric powered bicycles bolster demand for
batteries. China's car sales hit their highest volume in nine months
in October 2013.
U.S demand for primary and secondary batteries is expected to
increase by 4.2 percent per year to $17.1 billion in 2017,
accelerating from the 2007-2012 period. Gains will be driven by an
upturn in motor vehicle and other durable goods output, and
supported by stronger personal consumption expenditures
growth. Motor vehicles in US will post the largest increases in dollar
terms as motor vehicle production rises after more than a decade of
decline. It will also be the fastest growing market in percentage
terms, with overall battery demand bolstered by expanding
production and sales of hybrid/electric vehicles (HEVs). Backup
power supplies will register the next fastest demand gains, boosted
by a pickup in nonresidential fixed investment, especially for
wireless device transmission towers and related facilities, and by
continuing concerns about the perceived vulnerability of the
nation's power grid in US.
With greater demand and restricted supplies the prices of battery
metal Lead can show buoyancy in 2014.
Lead Zinc spread may expand further and widen towards 18 in MCX
as Lead prices can outperform Zinc amid strong fundamentals in
2014. Lead has a key support of 110 in MCX and $1750 in LME and
key resistance of 160 in MCX and $2650 in LME.
Yearly price movement of Lead futures (MCX)
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 43.65 74.25 101.30 49.35 113.50 115.40 107.75 127.15
High 80.95 154.40 140.70 121.50 122.00 135.40 128.20 155.40
Low 42.00 69.00 40.50 47.80 72.55 88.50 99.10 104.30
Close 74.25 99.80 45.95 111.65 115.65 107.65 127.75 133.55*
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
* Close as on 13th December 2013
Rs./Kg Rs./Kg
Annual Commentary & Outlook: CardamomAnnual Outlook : Aluminium COMMODITY OUTLOOK 2014
®
26
Annual outlook
Aluminium Range: MCX: Rs 90-135
LME: $1600-2200
White metal Aluminum may remain range bound in 2014. Increase
in demand from key consuming sectors can be offset by oversupply
concerns in 2014. Also the movement of crude oil prices in 2014
will be watched as the energy constitutes 35-40 per cent of
aluminum costs. Positions of cancelled warrants and mining
closures will influence its prices in 2014.
The demand trend from the sectors like packaging, aerospace,
automobiles, construction and power will influence its prices in
2014.
Aluminium is also used from airliners to drinks cans and its demand
pattern in 2014 will have big impact on the prices.
The future of domestic demand in China owes much to
infrastructure projects, particularly compared to consumption in
Western economies. In North America consumption is driven by
transport, such as automotive and aerospace, as seen in a mature
consumer driven economy by packaging.
But in China, demand is driven by construction, with transport
playing a lesser role and packaging down in single figures. Chinese
demand therefore has the potential to be more volatile. Meanwhile,
while global aluminum demand is growing, production is growing
at faster pace.
Indonesia's plan to ban the export of mineral ores, including
bauxite, is now slated to take effect from January 13, 2014.
Meanwhile, China, the major importer of Indonesian bauxite,
remained generally skeptical that a full ban would actually be
imposed due to economic and social factors. Bauxite and other ore
exports bring in a lot of money to Indonesia, and a full ban could
hurt the economy significantly. Bauxite supply in 2014, however
remains a major concern to Chinese importers, many of which have
been actively seeking and stepping up their search for alternative
supplies, as well as stockpiling, in recent months.
The spot market premium in 2014 will affect its prices, which are
determined by the higher freight cost, financial deals and supply
demand dynamics.
By volume, aluminium is by far the most stocked metal in LME
warehouses. Total stocks currently represent 11-12 weeks of
consumption. However, stocks in terms of weeks of consumption
have been slowly but steadily decreasing since the peak seen in
2009, indicating solid demand growth.
According to the latest figures from the World Bureau of Metal
Statistics “The global aluminum market surplus totaled 1.2 million
tonnes in the first nine months of the 2013” That is more than
double the 539,000 tonnes surplus recorded over the whole of
2012.
Aluminium smelters worldwide are battling high energy costs,
especially the small producers. High energy costs, which are a large
proportion of the total cost structure for aluminium smelters have
already produced many victims worldwide. In particular, the
smaller smelters have difficulty remaining profitable with
relatively low aluminium prices and high energy costs. These
smaller smelters produce relatively low tonnages in order to absorb
the increasing costs. Moreover, small players have limited power to
negotiate better power deals or to secure power supply at more
economical rates.
Leading indicators across regions are showing promising results,
including the increase in the purchasing manufacturing indexes,
increases in car sales & production and gains in industrial
production in general which can give support to Aluminum prices.
China has ambitious plans to restructure its aluminium sector by
eliminating obsolete aluminium plants. China must lower its
capacity in order to rebalance its oversupplied market and restore
prices. The pace of restructuring is slow. However, at this stage, only
plans for the sector have been announced. These plans include
investments in energy-efficient facilities and improvements in
technology for lower energy consumption. The closure of small
facilities will be inevitable. The proposal for changes in
warehousing policies (to force the reduction of queues) could
become effective by April 2014, which could dampen the
aluminium prices.
Aluminum prices is expected to take key support near 90 in MCX
and $1600 in LME and resistance will be 135 in MCX and $2200 in
LME in 2013.
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 99.00 125.60 98.00 71.05 105.65 112.75 108.95 114.15
High 159.15 129.00 144.05 107.30 115.60 125.10 118.70 133.50
Low 98.75 96.80 68.60 64.00 88.40 105.00 103.60 99.10
Close 126.05 100.55 73.20 105.20 111.85 108.15 113.60 113.30*
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
Yearly price movement of Aluminium futures (MCX)
* Close as on 13th December 2013
Cardamom
Annual Commentary
Annual Outlook
During the previous year, cardamom prices continuously slipped
throughout the whole year, because of bearish fundamentals. In
spices complex, cardamom futures fell the most by more than 48%
on MCX, touching low at 559.90 levels. Meanwhile, on the spot
market at individual auctions, the counter tested 600 levels. Factors
such as lack of aggressive buying by upcountry dealers, supplies
outstripping demand, good rains giving positive impact on the crop
and import of cheaper-grade cardamom from Guatemala aided to
the steep fall in the counter. In addition, the arrivals quantity of
cardamom to the market had almost doubled with the introduction
of high-yielding 'Njallani' variety and new farming techniques. An
upsurge in the arrivals was visible, as it was reported that the
supplies by the end of November were viewed by the trade as the
highest ever in the history of the crop. By the end of the year, the
counter stabilized near 600 levels as the growers were not
interested to sell their produce because it was much below the
remunerative price levels. The current season has begun officially
from August 1 and hence the total arrivals up to Dec. 29 stood at
11,169 tonnes against 6,115 tonnes in the last season. The sales
were at 10,892 tonnes and 5,823 tonnes respectively. On the
business front, the estimated exports of cardamom (small) from
India during April - September 2013 witnessed a rise of 51% as
compared to same period in 2012, meanwhile the exports of large
variety dipped by 53%, in terms of quantity.
The fundamentals on the supply side show that the excess rainfall in
major growing regions of cardamom has taken away the initial
expectation of bumper production in the current crop year of 2012-
13. Now, production is estimated to be around 14000 tonnes, which
is about 6% less than the 2011-12 year production. In this year
2013-14, the growers are expecting the output to be further down,
around 30% lower. Factors affecting the decline in production are
the heavy rains in the key growing areas of Kerala and Karnataka,
climate change & labour requirements issues. Moreover, growers
are opting for an intercrop after being hit by low prices during the
previous seasons. According to them, anything below Rs 750 a kg is
not remunerative. In the current scenario, the weighted average
price as on December 1 stood at around Rs 605.31 a kg as against Rs
758.44 a kg as on the same date a year ago. On the international
market, the harvesting of the new crop had just started in
Guatemala & the crop size is similar to last year. Guatemala is the
largest producer of cardamom in the world, with an average annual
yield of between 25,000 to 29,000 metric tonnes.
Currently, cardamom futures on MCX are reeling under supply
pressure of above 100 tonnes at each auction from the current
rounds of harvesting. The buyers are keeping away from fresh
Range: Rs. 550-950
buying & not risking as they fear that with such pace of arrivals, the
counter may fall further towards 650 levels. However, by the end of
the year the inflow of 8mm bold capsules would witness a decline,
giving support to the cardamom prices. Cardamom futures are
expected to hold above 600 levels. In the first half of the year, the
counter will possibly gain by 10-15% as the stockiest may hold back
the capsules to meet the demand during Ramadan (July 28, 2014),
keeping a view in mind that the supplies for the next season may
remain tight as the output is declining on year-on-year basis. On the
export front, the main export destination for India would be North
Africa and West Asia region, with Saudi Arabia - the biggest
importer. The United States and Europe are not looking at India for
imports, as Indian parity is high. In EU and United States, demand is
largely fueled by the large south Asian community residing locally.
Cardamom wholesale distribution also takes place from Colombia
as the cardamom grown in that region is fresh, aromatic and of
superior quality.
Going by the seasonality, in the latter half of the year i.e from July to
October, cardamom prices are likely to plunge more than 20% on
account of the fresh plucking that would start in the major growing
areas such as Kerala & Karnataka. The whole harvest will be
completed in 7 or 8 rounds, by maintaining a gap of 20-30 days. The
seasonal lows may be seen in the month of October as the bulk of the
arrivals hit the spot markets. Moreover, the Guatemalan harvest
begins in September and concludes in the February month.
During the last three months of this calendar year, cardamom prices
would possibly see a bounce back, pushed by the seasonal demand
during marriages & winters. However, the upside may remain
capped near 950 levels.
Yearly price movement of Cardamom futures
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
®
27
2006 2007 2008 2009 2010 2011 2012 2013
Open 288.00 406.50 639.50 554.50 1118.00 1587.50 598.30 1022.10
High 638.00 643.50 773.00 1135.90 2097.00 1615.00 1508.00 1082.70
Low 206.10 362.00 530.30 487.00 868.00 545.00 570.00 559.90
Close 405.50 640.00 553.50 1112.70 1581.40 600.70 1021.70 597.10
0.00
500.00
1000.00
1500.00
2000.00
2500.00
Rs./Kg
Rs./Kg
Annual Commentary & Outlook: CardamomAnnual Outlook : Aluminium COMMODITY OUTLOOK 2014
®
26
Annual outlook
Aluminium Range: MCX: Rs 90-135
LME: $1600-2200
White metal Aluminum may remain range bound in 2014. Increase
in demand from key consuming sectors can be offset by oversupply
concerns in 2014. Also the movement of crude oil prices in 2014
will be watched as the energy constitutes 35-40 per cent of
aluminum costs. Positions of cancelled warrants and mining
closures will influence its prices in 2014.
The demand trend from the sectors like packaging, aerospace,
automobiles, construction and power will influence its prices in
2014.
Aluminium is also used from airliners to drinks cans and its demand
pattern in 2014 will have big impact on the prices.
The future of domestic demand in China owes much to
infrastructure projects, particularly compared to consumption in
Western economies. In North America consumption is driven by
transport, such as automotive and aerospace, as seen in a mature
consumer driven economy by packaging.
But in China, demand is driven by construction, with transport
playing a lesser role and packaging down in single figures. Chinese
demand therefore has the potential to be more volatile. Meanwhile,
while global aluminum demand is growing, production is growing
at faster pace.
Indonesia's plan to ban the export of mineral ores, including
bauxite, is now slated to take effect from January 13, 2014.
Meanwhile, China, the major importer of Indonesian bauxite,
remained generally skeptical that a full ban would actually be
imposed due to economic and social factors. Bauxite and other ore
exports bring in a lot of money to Indonesia, and a full ban could
hurt the economy significantly. Bauxite supply in 2014, however
remains a major concern to Chinese importers, many of which have
been actively seeking and stepping up their search for alternative
supplies, as well as stockpiling, in recent months.
The spot market premium in 2014 will affect its prices, which are
determined by the higher freight cost, financial deals and supply
demand dynamics.
By volume, aluminium is by far the most stocked metal in LME
warehouses. Total stocks currently represent 11-12 weeks of
consumption. However, stocks in terms of weeks of consumption
have been slowly but steadily decreasing since the peak seen in
2009, indicating solid demand growth.
According to the latest figures from the World Bureau of Metal
Statistics “The global aluminum market surplus totaled 1.2 million
tonnes in the first nine months of the 2013” That is more than
double the 539,000 tonnes surplus recorded over the whole of
2012.
Aluminium smelters worldwide are battling high energy costs,
especially the small producers. High energy costs, which are a large
proportion of the total cost structure for aluminium smelters have
already produced many victims worldwide. In particular, the
smaller smelters have difficulty remaining profitable with
relatively low aluminium prices and high energy costs. These
smaller smelters produce relatively low tonnages in order to absorb
the increasing costs. Moreover, small players have limited power to
negotiate better power deals or to secure power supply at more
economical rates.
Leading indicators across regions are showing promising results,
including the increase in the purchasing manufacturing indexes,
increases in car sales & production and gains in industrial
production in general which can give support to Aluminum prices.
China has ambitious plans to restructure its aluminium sector by
eliminating obsolete aluminium plants. China must lower its
capacity in order to rebalance its oversupplied market and restore
prices. The pace of restructuring is slow. However, at this stage, only
plans for the sector have been announced. These plans include
investments in energy-efficient facilities and improvements in
technology for lower energy consumption. The closure of small
facilities will be inevitable. The proposal for changes in
warehousing policies (to force the reduction of queues) could
become effective by April 2014, which could dampen the
aluminium prices.
Aluminum prices is expected to take key support near 90 in MCX
and $1600 in LME and resistance will be 135 in MCX and $2200 in
LME in 2013.
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 99.00 125.60 98.00 71.05 105.65 112.75 108.95 114.15
High 159.15 129.00 144.05 107.30 115.60 125.10 118.70 133.50
Low 98.75 96.80 68.60 64.00 88.40 105.00 103.60 99.10
Close 126.05 100.55 73.20 105.20 111.85 108.15 113.60 113.30*
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
Yearly price movement of Aluminium futures (MCX)
* Close as on 13th December 2013
Cardamom
Annual Commentary
Annual Outlook
During the previous year, cardamom prices continuously slipped
throughout the whole year, because of bearish fundamentals. In
spices complex, cardamom futures fell the most by more than 48%
on MCX, touching low at 559.90 levels. Meanwhile, on the spot
market at individual auctions, the counter tested 600 levels. Factors
such as lack of aggressive buying by upcountry dealers, supplies
outstripping demand, good rains giving positive impact on the crop
and import of cheaper-grade cardamom from Guatemala aided to
the steep fall in the counter. In addition, the arrivals quantity of
cardamom to the market had almost doubled with the introduction
of high-yielding 'Njallani' variety and new farming techniques. An
upsurge in the arrivals was visible, as it was reported that the
supplies by the end of November were viewed by the trade as the
highest ever in the history of the crop. By the end of the year, the
counter stabilized near 600 levels as the growers were not
interested to sell their produce because it was much below the
remunerative price levels. The current season has begun officially
from August 1 and hence the total arrivals up to Dec. 29 stood at
11,169 tonnes against 6,115 tonnes in the last season. The sales
were at 10,892 tonnes and 5,823 tonnes respectively. On the
business front, the estimated exports of cardamom (small) from
India during April - September 2013 witnessed a rise of 51% as
compared to same period in 2012, meanwhile the exports of large
variety dipped by 53%, in terms of quantity.
The fundamentals on the supply side show that the excess rainfall in
major growing regions of cardamom has taken away the initial
expectation of bumper production in the current crop year of 2012-
13. Now, production is estimated to be around 14000 tonnes, which
is about 6% less than the 2011-12 year production. In this year
2013-14, the growers are expecting the output to be further down,
around 30% lower. Factors affecting the decline in production are
the heavy rains in the key growing areas of Kerala and Karnataka,
climate change & labour requirements issues. Moreover, growers
are opting for an intercrop after being hit by low prices during the
previous seasons. According to them, anything below Rs 750 a kg is
not remunerative. In the current scenario, the weighted average
price as on December 1 stood at around Rs 605.31 a kg as against Rs
758.44 a kg as on the same date a year ago. On the international
market, the harvesting of the new crop had just started in
Guatemala & the crop size is similar to last year. Guatemala is the
largest producer of cardamom in the world, with an average annual
yield of between 25,000 to 29,000 metric tonnes.
Currently, cardamom futures on MCX are reeling under supply
pressure of above 100 tonnes at each auction from the current
rounds of harvesting. The buyers are keeping away from fresh
Range: Rs. 550-950
buying & not risking as they fear that with such pace of arrivals, the
counter may fall further towards 650 levels. However, by the end of
the year the inflow of 8mm bold capsules would witness a decline,
giving support to the cardamom prices. Cardamom futures are
expected to hold above 600 levels. In the first half of the year, the
counter will possibly gain by 10-15% as the stockiest may hold back
the capsules to meet the demand during Ramadan (July 28, 2014),
keeping a view in mind that the supplies for the next season may
remain tight as the output is declining on year-on-year basis. On the
export front, the main export destination for India would be North
Africa and West Asia region, with Saudi Arabia - the biggest
importer. The United States and Europe are not looking at India for
imports, as Indian parity is high. In EU and United States, demand is
largely fueled by the large south Asian community residing locally.
Cardamom wholesale distribution also takes place from Colombia
as the cardamom grown in that region is fresh, aromatic and of
superior quality.
Going by the seasonality, in the latter half of the year i.e from July to
October, cardamom prices are likely to plunge more than 20% on
account of the fresh plucking that would start in the major growing
areas such as Kerala & Karnataka. The whole harvest will be
completed in 7 or 8 rounds, by maintaining a gap of 20-30 days. The
seasonal lows may be seen in the month of October as the bulk of the
arrivals hit the spot markets. Moreover, the Guatemalan harvest
begins in September and concludes in the February month.
During the last three months of this calendar year, cardamom prices
would possibly see a bounce back, pushed by the seasonal demand
during marriages & winters. However, the upside may remain
capped near 950 levels.
Yearly price movement of Cardamom futures
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
®
27
2006 2007 2008 2009 2010 2011 2012 2013
Open 288.00 406.50 639.50 554.50 1118.00 1587.50 598.30 1022.10
High 638.00 643.50 773.00 1135.90 2097.00 1615.00 1508.00 1082.70
Low 206.10 362.00 530.30 487.00 868.00 545.00 570.00 559.90
Close 405.50 640.00 553.50 1112.70 1581.40 600.70 1021.70 597.10
0.00
500.00
1000.00
1500.00
2000.00
2500.00
Rs./Kg
Rs./Kg
Annual Commentary & Outlook: Turmeric Annual Commentary & Outlook: Jeera COMMODITY OUTLOOK 2014COMMODITY OUTLOOK 2014
®
28
Turmeric
Annual Commentary
Annual Outlook
Turmeric - the yellow spice, had a rough journey during the past
year and it witnessed lows of 4426 levels on the national bourse,
falling by more than 40%. During the period January-April,
turmeric futures witnessed a consolidation in the range of 6000-
7000 levels, supported by demand from North India & increased
buying by upcountry exporters. Heavy rains in Andhra Pradesh had
damaged the crops and raised concerns over the availability of the
quality produce. According to a press release issued by the Andhra
Pradesh Government, around 9,240 tonnes of turmeric in
Nizamabad yard were damaged due to heavy rain. By mid-April,
prices of hybrid variety of turmeric at the spot market, touched Rs
10,000 per quintal. The farmers had begun to stock up turmeric
expecting prices to go up further higher. However, the fundamentals
reversed because the factors such as profit booking, dwindling
upcountry orders & lesser buying interest from stockiest came into
picture. Even, a day had come when 60% of the produce offered
went unsold. The growers came with their medium and poor
quality produce in Erode markets and holding back their quality
produce, with an expectation of prices to improve. Turmeric prices
failed to sustain at higher levels on the spot as well as on the
national bourse due to higher carry forward stocks available in the
domestic market. It was estimated that the spot market carried
around 60-62 lakh bags in the major mandies, which was easy to
convene the demand till the year-end. Most importantly, the area
under cultivation witnessed an increasing trend as farmers shifted
from paddy to turmeric cultivation. On the export front, estimated
export of turmeric from India during April - September 2013
witnessed a meager change of 2% in terms of quantity, while the
increase in value was 37% more as compared to April - September
2012, as Indian Saffron has always been preferred in the foreign
countries because of its bright yellow colour & high curcumin
content.
The amount of stocks held, present crop scenario, export demand
and domestic demand would be the major factors deciding the price
of turmeric in India. In yellow spice, the carryover stocks from the
previous year are estimated around 35-36 lakh bags lakh bags.
Coming to 2013-14, the area under turmeric cultivation in Andhra
Pradesh is around 53279 hectares, which is 21.38% lesser than in
2012-13. In Tamil Nadu, the area under turmeric cultivation in the
current season (2013-14) is around 18550 hectares, which is 40%
lesser than in 2012-13. Despite projections of a lower crop next
season, there would be no shortage to meet the demand for the next
2-3 months i.e, around 8-10 lakh bags. The annual demand for
turmeric is around 65-75 lakh bags, which includes the domestic
and export demand.
Range: Rs. 4500-9000
In the current scenario, the harvesting has begun & may continue
till end of the March. In the continuation, the fresh arrivals are likely
to flow into the Erode market from Mysore region, during the
period from January to April. On the demand side, the upcountry
exporters are now lacking the orders from North India; hence the
sales at the spot market are lower. Tracking the weak fundamentals
of the spot markets, turmeric futures on the national bourse, is
expected to face resistance near 7000 levels. The factors such as
arrival pressure and high carry forward stocks are likely to keep a
lid over the gains. Fresh turmeric arrival in Erode regulated market
would start from mid January and get continued to June. Adding to
it, the inflow of arrivals during January to April turmeric from
Mysore region to Erode market, shall add to the selling pressure
over the counter. The general trend in Erode market is the arrival of
Mysore region crops during the month of January to April followed
by Anthiyur, Bhavani, Gobi, Sathyamangalam, Thondamuthur,
Kodumudi and Modakurichi regions.
However, the downside may remain capped near 4500 levels,
supported by the demand from the stockiest to store the
commodity & make it available to the upcountry buyers throughout
the year. As regards, the outlook on price movement, during the first
half of the year, turmeric futures may witness a consolidation in the
range of 4500-8000 levels. The forward contracts of turmeric
futures (July) is quoting near Rs.6244 per quintal. The seasonality
pattern shows that the period of July-September, the counter may
see a downfall as the demand for the yellow spice tapers off with the
onset of monsoon, as the content of mositure increases. Moreover,
the heavy rainfall occurs in the coastal regions & this hampers the
shipments. In the last quarter of the year, turmeric prices may get
pushed up towards 9000 levels by the factors such as lower level
buying to meet the marriage season demand & export enquiries for
high content of the Indian curcumin.
Yearly price movement of Turmeric futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 2267.00 2030.00 2823.00 3475.00 7341.00 10230.00 4770.00 6818.00
High 2749.00 2878.00 4994.00 13971.00 16350.00 10980.00 6832.00 7248.00
Low 1666.00 1795.00 2690.00 3456.00 6600.00 3918.00 3336.00 4426.00
Close 2027.00 2818.00 3479.00 7395.00 10244.00 4766.00 6798.00 5034.00
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
14000.00
16000.00
18000.00
Rs. /Quintal
®
29
Jeera
Annual Commentary
Annual Outlook
Among spices complex, jeera futures fell the least by 19%, tested a
low of 11895 levels. Factors such as low demand from stockists and
favourable weather conditions in producing states kept a lid over
the gains. Since the beginning of the year, the strong production
estimates in Gujarat & carryover stock at around 8-9 lakh bags,
softened the counter. However, the counter managed to take
support above 12500 levels till mid-October, cushioned by exports
orders getting diverted to India due to crisis situation in Syria. On
the export front, the estimated export of jeera from India during
April - September 2013 witnessed a whopping rise of 93% both in
terms of value and quantity as compared to April - September 2012.
For Singapore, Indian cumin seed with an allowance for 1% foreign
matter was offered at $2,150-2,250/tonne free on board Mumbai.
Cumin seed 1% for Europe was offered at $2,400-2,500/tonne on
cost and freight basis. On the supply side, the global supplies were
also less as other producing nations such as Turkey and Iran were
facing a shortage of crop. India's jeera crop for the year 2012-13 was
expected to be 400,000 tonnes, about 10-15% higher from the five
year average but lower than the previous year's record production
of 461,160 tonnes. In the last quarter of the year, jeera prices
tumbled further on the back of increasing supply during harvesting
season. Being a Rabi crop and getting good soil moisture after a
good monsoon, the crop's acreage was higher due to the favourable
weather conditions.
Jeera, being a tropical plant, is cultivated as a Rabi crop in India.
Internationally, cumin is mainly grown in Egypt, Syria, Turkey and
Iran. The estimated world production of cumin is around 300,000
tonnes. This season in India, a hope of higher production has
emerged due to the favorable weather conditions prevailing over
the major growing areas. On the contrary, some farmers on a minor
scale have been seen to get diverted towards growing pulses. Jeera
sowing has started in the key cultivating areas. Favourable weather
conditions has helped crop in vigorous vegetative growth. Sowing
operations are still on in some parts of Gujarat and Rajasthan.
Weather remains favourable for the sowing, germination and
vegetative growth of the crop. The initial estimates show that the
seed area is likely to increase around 20 - 25% in Gujarat and in
Range: Rs. 10500-17000
Rajasthan 25 – 30%. Jeera output is estimated at 40-45 lakh bags (of
55 kgs each), higher than 40 lakh bags in 2012. The total carryover
stocks of jeera are currently estimated at 8 lakh bags as against 10
bags during the same time a year ago.
On the demand side, export enquiries are flowing into Indian
pockets from the middle-east countries like Jordan and Iraq, which
were usually the buyers from the main competitor - Syria and
Turkey. The U.S, U.K, Japan, Brazil are the major cumin seeds
importing countries. Both whole seeds and powdered seeds are
internationally traded. Cumin essential oil is also becoming popular
in the western hemisphere. Indian exports have witnessed a CAGR
of 9% over the last 5 years.
Jeera futures on NCDEX would consolidate in the range of 11500-
15000 levels till the month of May, as a selling pressure from the
harvesting season would be there over the counter. Tracking the
seasonality, jeera prices may rise by 10-15% in the month of June-
July, taking the advantage of lean season in the global market. The
new crop in Syria and Turkey is harvested in August–September, so
until then, Indian cumin seed finds good market in overseas
countries. Currently, 1% Jeera of Indian origin is being offered for
Singapore at $2,150-2,250/tonne (FOB Mumbai) while for Europe
at $2,400-2,500/tonne (CNF).
In long term, the upside momentum in jeera futures on the national
bourse may remain capped near 17000 levels on account of higher
output & carry forward stocks from the previous season.
Yearly price movement of Jeera futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 6170.00 9010.00 10412.00 10450.00 14590.00 14350.00 15905.00 14695.00
High 9165.50 14425.00 14190.00 16599.00 15915.00 17520.00 16975.00 14845.00
Low 4877.40 8811.00 8112.00 10227.00 10710.00 12975.00 11275.00 11895.00
Close 8977.20 10457.00 10481.00 14646.00 14326.00 16024.00 14672.50 12835.00
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
14000.00
16000.00
18000.00
20000.00
Rs. /Quintal
Annual Commentary & Outlook: Turmeric Annual Commentary & Outlook: Jeera COMMODITY OUTLOOK 2014COMMODITY OUTLOOK 2014
®
28
Turmeric
Annual Commentary
Annual Outlook
Turmeric - the yellow spice, had a rough journey during the past
year and it witnessed lows of 4426 levels on the national bourse,
falling by more than 40%. During the period January-April,
turmeric futures witnessed a consolidation in the range of 6000-
7000 levels, supported by demand from North India & increased
buying by upcountry exporters. Heavy rains in Andhra Pradesh had
damaged the crops and raised concerns over the availability of the
quality produce. According to a press release issued by the Andhra
Pradesh Government, around 9,240 tonnes of turmeric in
Nizamabad yard were damaged due to heavy rain. By mid-April,
prices of hybrid variety of turmeric at the spot market, touched Rs
10,000 per quintal. The farmers had begun to stock up turmeric
expecting prices to go up further higher. However, the fundamentals
reversed because the factors such as profit booking, dwindling
upcountry orders & lesser buying interest from stockiest came into
picture. Even, a day had come when 60% of the produce offered
went unsold. The growers came with their medium and poor
quality produce in Erode markets and holding back their quality
produce, with an expectation of prices to improve. Turmeric prices
failed to sustain at higher levels on the spot as well as on the
national bourse due to higher carry forward stocks available in the
domestic market. It was estimated that the spot market carried
around 60-62 lakh bags in the major mandies, which was easy to
convene the demand till the year-end. Most importantly, the area
under cultivation witnessed an increasing trend as farmers shifted
from paddy to turmeric cultivation. On the export front, estimated
export of turmeric from India during April - September 2013
witnessed a meager change of 2% in terms of quantity, while the
increase in value was 37% more as compared to April - September
2012, as Indian Saffron has always been preferred in the foreign
countries because of its bright yellow colour & high curcumin
content.
The amount of stocks held, present crop scenario, export demand
and domestic demand would be the major factors deciding the price
of turmeric in India. In yellow spice, the carryover stocks from the
previous year are estimated around 35-36 lakh bags lakh bags.
Coming to 2013-14, the area under turmeric cultivation in Andhra
Pradesh is around 53279 hectares, which is 21.38% lesser than in
2012-13. In Tamil Nadu, the area under turmeric cultivation in the
current season (2013-14) is around 18550 hectares, which is 40%
lesser than in 2012-13. Despite projections of a lower crop next
season, there would be no shortage to meet the demand for the next
2-3 months i.e, around 8-10 lakh bags. The annual demand for
turmeric is around 65-75 lakh bags, which includes the domestic
and export demand.
Range: Rs. 4500-9000
In the current scenario, the harvesting has begun & may continue
till end of the March. In the continuation, the fresh arrivals are likely
to flow into the Erode market from Mysore region, during the
period from January to April. On the demand side, the upcountry
exporters are now lacking the orders from North India; hence the
sales at the spot market are lower. Tracking the weak fundamentals
of the spot markets, turmeric futures on the national bourse, is
expected to face resistance near 7000 levels. The factors such as
arrival pressure and high carry forward stocks are likely to keep a
lid over the gains. Fresh turmeric arrival in Erode regulated market
would start from mid January and get continued to June. Adding to
it, the inflow of arrivals during January to April turmeric from
Mysore region to Erode market, shall add to the selling pressure
over the counter. The general trend in Erode market is the arrival of
Mysore region crops during the month of January to April followed
by Anthiyur, Bhavani, Gobi, Sathyamangalam, Thondamuthur,
Kodumudi and Modakurichi regions.
However, the downside may remain capped near 4500 levels,
supported by the demand from the stockiest to store the
commodity & make it available to the upcountry buyers throughout
the year. As regards, the outlook on price movement, during the first
half of the year, turmeric futures may witness a consolidation in the
range of 4500-8000 levels. The forward contracts of turmeric
futures (July) is quoting near Rs.6244 per quintal. The seasonality
pattern shows that the period of July-September, the counter may
see a downfall as the demand for the yellow spice tapers off with the
onset of monsoon, as the content of mositure increases. Moreover,
the heavy rainfall occurs in the coastal regions & this hampers the
shipments. In the last quarter of the year, turmeric prices may get
pushed up towards 9000 levels by the factors such as lower level
buying to meet the marriage season demand & export enquiries for
high content of the Indian curcumin.
Yearly price movement of Turmeric futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 2267.00 2030.00 2823.00 3475.00 7341.00 10230.00 4770.00 6818.00
High 2749.00 2878.00 4994.00 13971.00 16350.00 10980.00 6832.00 7248.00
Low 1666.00 1795.00 2690.00 3456.00 6600.00 3918.00 3336.00 4426.00
Close 2027.00 2818.00 3479.00 7395.00 10244.00 4766.00 6798.00 5034.00
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
14000.00
16000.00
18000.00
Rs. /Quintal
®
29
Jeera
Annual Commentary
Annual Outlook
Among spices complex, jeera futures fell the least by 19%, tested a
low of 11895 levels. Factors such as low demand from stockists and
favourable weather conditions in producing states kept a lid over
the gains. Since the beginning of the year, the strong production
estimates in Gujarat & carryover stock at around 8-9 lakh bags,
softened the counter. However, the counter managed to take
support above 12500 levels till mid-October, cushioned by exports
orders getting diverted to India due to crisis situation in Syria. On
the export front, the estimated export of jeera from India during
April - September 2013 witnessed a whopping rise of 93% both in
terms of value and quantity as compared to April - September 2012.
For Singapore, Indian cumin seed with an allowance for 1% foreign
matter was offered at $2,150-2,250/tonne free on board Mumbai.
Cumin seed 1% for Europe was offered at $2,400-2,500/tonne on
cost and freight basis. On the supply side, the global supplies were
also less as other producing nations such as Turkey and Iran were
facing a shortage of crop. India's jeera crop for the year 2012-13 was
expected to be 400,000 tonnes, about 10-15% higher from the five
year average but lower than the previous year's record production
of 461,160 tonnes. In the last quarter of the year, jeera prices
tumbled further on the back of increasing supply during harvesting
season. Being a Rabi crop and getting good soil moisture after a
good monsoon, the crop's acreage was higher due to the favourable
weather conditions.
Jeera, being a tropical plant, is cultivated as a Rabi crop in India.
Internationally, cumin is mainly grown in Egypt, Syria, Turkey and
Iran. The estimated world production of cumin is around 300,000
tonnes. This season in India, a hope of higher production has
emerged due to the favorable weather conditions prevailing over
the major growing areas. On the contrary, some farmers on a minor
scale have been seen to get diverted towards growing pulses. Jeera
sowing has started in the key cultivating areas. Favourable weather
conditions has helped crop in vigorous vegetative growth. Sowing
operations are still on in some parts of Gujarat and Rajasthan.
Weather remains favourable for the sowing, germination and
vegetative growth of the crop. The initial estimates show that the
seed area is likely to increase around 20 - 25% in Gujarat and in
Range: Rs. 10500-17000
Rajasthan 25 – 30%. Jeera output is estimated at 40-45 lakh bags (of
55 kgs each), higher than 40 lakh bags in 2012. The total carryover
stocks of jeera are currently estimated at 8 lakh bags as against 10
bags during the same time a year ago.
On the demand side, export enquiries are flowing into Indian
pockets from the middle-east countries like Jordan and Iraq, which
were usually the buyers from the main competitor - Syria and
Turkey. The U.S, U.K, Japan, Brazil are the major cumin seeds
importing countries. Both whole seeds and powdered seeds are
internationally traded. Cumin essential oil is also becoming popular
in the western hemisphere. Indian exports have witnessed a CAGR
of 9% over the last 5 years.
Jeera futures on NCDEX would consolidate in the range of 11500-
15000 levels till the month of May, as a selling pressure from the
harvesting season would be there over the counter. Tracking the
seasonality, jeera prices may rise by 10-15% in the month of June-
July, taking the advantage of lean season in the global market. The
new crop in Syria and Turkey is harvested in August–September, so
until then, Indian cumin seed finds good market in overseas
countries. Currently, 1% Jeera of Indian origin is being offered for
Singapore at $2,150-2,250/tonne (FOB Mumbai) while for Europe
at $2,400-2,500/tonne (CNF).
In long term, the upside momentum in jeera futures on the national
bourse may remain capped near 17000 levels on account of higher
output & carry forward stocks from the previous season.
Yearly price movement of Jeera futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 6170.00 9010.00 10412.00 10450.00 14590.00 14350.00 15905.00 14695.00
High 9165.50 14425.00 14190.00 16599.00 15915.00 17520.00 16975.00 14845.00
Low 4877.40 8811.00 8112.00 10227.00 10710.00 12975.00 11275.00 11895.00
Close 8977.20 10457.00 10481.00 14646.00 14326.00 16024.00 14672.50 12835.00
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
14000.00
16000.00
18000.00
20000.00
Rs. /Quintal
Annual Commentary & Outlook: SoyabeanAnnual Commentary & Outlook: Chilli COMMODITY OUTLOOK 2014
®
30
Chilli
Annual Commentary
Annual Outlook
In 2013, Chilli futures began the year with a bang, gained more than
14% in the month of January and made a high of 7130 levels. In the
initial two months of the year, the factors such as shortfall in
production and good export demand flared up the chilli prices on
the national bourse as well as on the spot market. It was reported
that around 20-25 % decline in sowing was reflected in the output
as well. However, with the beginning of the third quarter till the
month of August, chilli futures plunged by 31% on account of profit
booking from the higher levels along with a forecast of a good chilli
crop in China and large carryover stocks of around 30 lakh bags in
the cold storages in Andhra Pradesh. Moreover, India faced intense
competition from China, as the later emerged as the largest paprika
producer prompting oleoresin exporters to set up factories in the
country. Statistics showed that India's Byadagi chilli production is
around 1 to 1.2 lakh tonne, China's paprika production has crossed
1.5 lakh tonne. As cited by Spices Board of India, the estimated
export of chilli from India during April - September 2013 dropped
by 3% in terms of quantity as compared to April - September 2012.
The fundamentals changed the price scenario from the month of
September, as the monsoon failed to spread out evenly across the
state of Andhra Pradesh & area under chilli dipped by 22%.
Meanwhile, in Madhya Pradesh, much of the crop from the first
picking was washed away by the excessive rains. In Karnataka,
farmers were seen getting shifted to other lucrative crops like
cotton. Taking advantage of lower level buying and reduced area
under cultivation, chilli futures rebounded from its lows to make a
yearly high at 7666 levels. The export demand from Sri Lanka and
Bangladesh also added to the bullish sentiments.
The carry forward stocks of the current year in Andhra Pradesh is
40 lakh bags (1 bag= 35 kg) where as in Tamil Nadu, it is 2 lakh bags.
As cited in the season and crop coverage report Rabi 2013 – 2014,
by the Dept. of Agriculture, Andhra Pradesh, for the week ending
with 4th December, 2013, the area sown under chilies is 27,301
hectares, is down by 4.91% as compared to the previous year. There
are talks that if weather remain good till picking activity in January,
Range: Rs. 4800-9100
production will improve. In Andhra Pradesh, new crop arrival is
likely to hit the spot market after the month of January. Thereafter,
Tamil Nadu chilli arrivals will start from March and extend till May,
which were sown during October- November and raised in nursery
or from directly sown. In the current scenario, new crop arrivals are
coming from Madhya Pradesh region in the domestic market. In
Madhya Pradesh, it is estimated that the total production of chilli in
the state is likely to be around 38-40 lakh bags as against the
previous estimate of 45-50 lakh bags for the current year.
The price forecast made by the Domestic and Export Market
Intelligence Cell - Tamil Nadu, revealed that the price of chilli would
be ruling between Rs.5500-6000 per quintal in February - March,
2014. The report also mentioned that the expected normal
production in the current season and good domestic and export
demand will keep the price to rule in the above predicted range.
Thereafter, with the onset of summer season, demand for chilli may
get dampened on account of closure of spot markets, due to peak
summer season. On the national bourse, chilli futures would
possibly maintain an uptrend taking support above 4800 levels. An
extended upside may be seen towards 9100 levels, surpassing 7100
levels in the time frame from August to December.
In China - the main competitor of India, there are reports that the
whole output in 2013 year in XinJiang, main paprika planting area
of China, is about 70-80 thousand tonnes, which is about 20
thousand tonnes less than that in year of 2012. But quality is better,
color is redder and asta is very high.
Yearly price movement of Chilli futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 2963.00 4156.00 3766.00 4484.00 5420.00 8490.00 6560.00 6240.00
High 7136.00 5920.00 5918.00 6951.00 8540.00 10970.00 6748.00 7666.00
Low 2946.00 3334.00 3503.00 4375.00 3833.00 6274.00 4430.00 4650.00
Close 4272.00 3777.00 4469.00 5439.00 8410.00 6556.00 6216.00 7224.00
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
Rs. /Quintal
Soyabean
Annual Commentary
Annual Outlook
Giving a snap shot of the roller coaster ride, soybean futures on the national bourse augmented about 35% from the 3100 levels during the period from January till mid-April, buoyed by the robust demand for soymeal. As compiled by the Solvent Extractors' Association of India, the export of oilmeals during the same period was 1,633,622 MT as compared to 1,593,529 MT during Jan-Apr '12. Growing international demand for animal feed also pushed Indian oil meal exports. The major importing countries were Iran, Thailand, Vietnam & Japan. The depreciating rupee as against dollar added to the positive sentiments of the counter. During the period of May-July, soybean prices witnessed a steep downfall of about 29% from the high of 4182 levels & witnessed a low of 2973 levels. The major growing areas in Madhya Pradesh & Maharashtra witnessed good amount of monsoon showers which contributed to soil moisture, thereby giving a way for suitable situation for sowing. A better monsoon boosted the farmer's planting sentiment which eventually reflected in the planting momentum. On the supply side, as cited by the Central Organisation for Oil Industry & Trade (COOIT), last year's soybean crop revised downward to 107.00 lakh tons from 113.40 lakh tonnes. On the international front, as per latest International Grain Council report, global soybean output is projected to expand by 4% year-on-year in 2013/14, to a record 282 MT, on the expectations for bumper crops in South America.
Thereafter from the month of August, market participants took the advantage of lower level buying and a life time low local currency as against dollar, which pushed up the soybean prices by about 35% to test the high of 4276 levels on the national bourse. There were concerns over the planting due to excessive rainfall in a couple of major soybean-growing areas. According to the survey conducted by Soybean Processors' Association (SOPA), the all India estimated yield for kharif 2013 witnessed a decline by 8.94%.
On CBOT, U.S soybean futures swung between the high of 1630 to low at 1255 levels. The factors that added to the bullish sentiments were hot, dry Midwest weather threatened to erode crop yields & robust export demand for soymeal. As of November 21st, cumulative soybean sales stand at 93.5% of the USDA forecast for 2013/2014 (current) marketing year versus a 5 year average of 64.70%. On the contrary, Brazil weather looked favorable for a great start to the crop & rain in South America giving an improvisation to early crop development and yield potential.
Rally in soyabean has been looking tired since past two months amid sustained supplies and bearish international trend. Though, sharp decline is unlikely in this counter on steady seasonal demand. As per the estimates given by the Central Organisation for Oil Industry & Trade (COOIT), the soybean crop for 2013-14 has been estimated at 102.30 lakh tonnes with a yield of 837 kgs per hectare as compared to 107 lakh tonnes and yield of 1000 kgs per hectare in 2012-13. On the international market, the estimates of higher soybean production in major producing nations of U.S and South America will be taken as a negative force & remain in focus of the
Range: NCDEX: Rs. 3000-4800
CBOT: $1135-$1650
market participants. In the latest report, U.S Department of Agriculture has pegged Argentina's production at 54.50 million tonnes, up 1.0 million due to higher projected area. The Brazil's soybean production is also on target to reach 88.50 million metric tonnes.
On the demand side, China's soybean imports are forecast to exceed 67.5 million tonnes in MY13/14, up from the estimated 60 million tonnes in MY12/13. Back at home, it is estimated by the COOIT, that in 2013-14 season the marketable surplus for crushing would be about 89.80 lakh tonnes as compared to 97 lakh tonnes in 2012-13. The soybean seeds that would be retained for sowing are estimated to be at 9 lakh tonnes as compared to 7.50 lakh tonnes in the previous year. The direct consumption is estimated at 3.50 lakh tonnes as compared to 2.50 lakh tonnes in 2012-13. On the export front, India's soymeal exports may be limited to 4 million tonnes in 2013/14 as rains during the harvest damaged the oilseed crop. Most of it would depend on the magnitude of the rupee factor, which has a direct relation with the volume of exports.
As regard price outlook, in the current scenario, soybean futures are likely to feel some selling pressure with the arrivals coming into the domestic market from the fresh harvest. The counter is likely to face resistance near 4000 levels. The forward curve of soybean futures on NCDEX is in backwardation, which suggests that the soybean prices are likely to trade in the range of 3500-4000 levels, in the first quarter of the calendar year. Going by the seasonality, buying at lower level during the month of April, would possibly be a good strategy keeping in mind a rise of about 5-6% till the month of July, supported by lean season of arrivals. Thereafter, the counter may witness a steep correction of about 10-15% till the month of September, as the fresh harvest of the crop would hit the domestic market. In the last quarter of the year, soybean prices may stabilize near 3000 levels and see some bounce back cushioned by factors such as sustained export demand & lower level buying.
Taking a long term view of U.S soybean futures on CBOT, the forwards month contracts are showing a downtrend owing to the record global soybean production pegged at 284.9 million tonnes, up 1.4 million due to increases for Argentina and Canada. The Soybean futures (Nov '14) is projected at $11.29/bushel, down by more than 12% as compared to the current price.
Yearly price movement of Soyabean futures
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 1187.00 1388.00 1991.00 1919.50 2389.00 2388.00 2521.00 3214.00
High 1448.00 2047.00 2826.00 2824.00 2413.00 2557.00 5064.50 4276.00
Low 1145.00 1345.20 1517.00 1907.00 1878.00 2031.00 2257.00 2838.00
Close 1392.85 1997.00 1909.00 2383.50 2374.50 2514.00 3203.00 3820.00
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
Rs. /Quintal
Note: Currently no future contracts are available in Chilli
®
31
Annual Commentary & Outlook: SoyabeanAnnual Commentary & Outlook: Chilli COMMODITY OUTLOOK 2014
®
30
Chilli
Annual Commentary
Annual Outlook
In 2013, Chilli futures began the year with a bang, gained more than
14% in the month of January and made a high of 7130 levels. In the
initial two months of the year, the factors such as shortfall in
production and good export demand flared up the chilli prices on
the national bourse as well as on the spot market. It was reported
that around 20-25 % decline in sowing was reflected in the output
as well. However, with the beginning of the third quarter till the
month of August, chilli futures plunged by 31% on account of profit
booking from the higher levels along with a forecast of a good chilli
crop in China and large carryover stocks of around 30 lakh bags in
the cold storages in Andhra Pradesh. Moreover, India faced intense
competition from China, as the later emerged as the largest paprika
producer prompting oleoresin exporters to set up factories in the
country. Statistics showed that India's Byadagi chilli production is
around 1 to 1.2 lakh tonne, China's paprika production has crossed
1.5 lakh tonne. As cited by Spices Board of India, the estimated
export of chilli from India during April - September 2013 dropped
by 3% in terms of quantity as compared to April - September 2012.
The fundamentals changed the price scenario from the month of
September, as the monsoon failed to spread out evenly across the
state of Andhra Pradesh & area under chilli dipped by 22%.
Meanwhile, in Madhya Pradesh, much of the crop from the first
picking was washed away by the excessive rains. In Karnataka,
farmers were seen getting shifted to other lucrative crops like
cotton. Taking advantage of lower level buying and reduced area
under cultivation, chilli futures rebounded from its lows to make a
yearly high at 7666 levels. The export demand from Sri Lanka and
Bangladesh also added to the bullish sentiments.
The carry forward stocks of the current year in Andhra Pradesh is
40 lakh bags (1 bag= 35 kg) where as in Tamil Nadu, it is 2 lakh bags.
As cited in the season and crop coverage report Rabi 2013 – 2014,
by the Dept. of Agriculture, Andhra Pradesh, for the week ending
with 4th December, 2013, the area sown under chilies is 27,301
hectares, is down by 4.91% as compared to the previous year. There
are talks that if weather remain good till picking activity in January,
Range: Rs. 4800-9100
production will improve. In Andhra Pradesh, new crop arrival is
likely to hit the spot market after the month of January. Thereafter,
Tamil Nadu chilli arrivals will start from March and extend till May,
which were sown during October- November and raised in nursery
or from directly sown. In the current scenario, new crop arrivals are
coming from Madhya Pradesh region in the domestic market. In
Madhya Pradesh, it is estimated that the total production of chilli in
the state is likely to be around 38-40 lakh bags as against the
previous estimate of 45-50 lakh bags for the current year.
The price forecast made by the Domestic and Export Market
Intelligence Cell - Tamil Nadu, revealed that the price of chilli would
be ruling between Rs.5500-6000 per quintal in February - March,
2014. The report also mentioned that the expected normal
production in the current season and good domestic and export
demand will keep the price to rule in the above predicted range.
Thereafter, with the onset of summer season, demand for chilli may
get dampened on account of closure of spot markets, due to peak
summer season. On the national bourse, chilli futures would
possibly maintain an uptrend taking support above 4800 levels. An
extended upside may be seen towards 9100 levels, surpassing 7100
levels in the time frame from August to December.
In China - the main competitor of India, there are reports that the
whole output in 2013 year in XinJiang, main paprika planting area
of China, is about 70-80 thousand tonnes, which is about 20
thousand tonnes less than that in year of 2012. But quality is better,
color is redder and asta is very high.
Yearly price movement of Chilli futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 2963.00 4156.00 3766.00 4484.00 5420.00 8490.00 6560.00 6240.00
High 7136.00 5920.00 5918.00 6951.00 8540.00 10970.00 6748.00 7666.00
Low 2946.00 3334.00 3503.00 4375.00 3833.00 6274.00 4430.00 4650.00
Close 4272.00 3777.00 4469.00 5439.00 8410.00 6556.00 6216.00 7224.00
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
Rs. /Quintal
Soyabean
Annual Commentary
Annual Outlook
Giving a snap shot of the roller coaster ride, soybean futures on the national bourse augmented about 35% from the 3100 levels during the period from January till mid-April, buoyed by the robust demand for soymeal. As compiled by the Solvent Extractors' Association of India, the export of oilmeals during the same period was 1,633,622 MT as compared to 1,593,529 MT during Jan-Apr '12. Growing international demand for animal feed also pushed Indian oil meal exports. The major importing countries were Iran, Thailand, Vietnam & Japan. The depreciating rupee as against dollar added to the positive sentiments of the counter. During the period of May-July, soybean prices witnessed a steep downfall of about 29% from the high of 4182 levels & witnessed a low of 2973 levels. The major growing areas in Madhya Pradesh & Maharashtra witnessed good amount of monsoon showers which contributed to soil moisture, thereby giving a way for suitable situation for sowing. A better monsoon boosted the farmer's planting sentiment which eventually reflected in the planting momentum. On the supply side, as cited by the Central Organisation for Oil Industry & Trade (COOIT), last year's soybean crop revised downward to 107.00 lakh tons from 113.40 lakh tonnes. On the international front, as per latest International Grain Council report, global soybean output is projected to expand by 4% year-on-year in 2013/14, to a record 282 MT, on the expectations for bumper crops in South America.
Thereafter from the month of August, market participants took the advantage of lower level buying and a life time low local currency as against dollar, which pushed up the soybean prices by about 35% to test the high of 4276 levels on the national bourse. There were concerns over the planting due to excessive rainfall in a couple of major soybean-growing areas. According to the survey conducted by Soybean Processors' Association (SOPA), the all India estimated yield for kharif 2013 witnessed a decline by 8.94%.
On CBOT, U.S soybean futures swung between the high of 1630 to low at 1255 levels. The factors that added to the bullish sentiments were hot, dry Midwest weather threatened to erode crop yields & robust export demand for soymeal. As of November 21st, cumulative soybean sales stand at 93.5% of the USDA forecast for 2013/2014 (current) marketing year versus a 5 year average of 64.70%. On the contrary, Brazil weather looked favorable for a great start to the crop & rain in South America giving an improvisation to early crop development and yield potential.
Rally in soyabean has been looking tired since past two months amid sustained supplies and bearish international trend. Though, sharp decline is unlikely in this counter on steady seasonal demand. As per the estimates given by the Central Organisation for Oil Industry & Trade (COOIT), the soybean crop for 2013-14 has been estimated at 102.30 lakh tonnes with a yield of 837 kgs per hectare as compared to 107 lakh tonnes and yield of 1000 kgs per hectare in 2012-13. On the international market, the estimates of higher soybean production in major producing nations of U.S and South America will be taken as a negative force & remain in focus of the
Range: NCDEX: Rs. 3000-4800
CBOT: $1135-$1650
market participants. In the latest report, U.S Department of Agriculture has pegged Argentina's production at 54.50 million tonnes, up 1.0 million due to higher projected area. The Brazil's soybean production is also on target to reach 88.50 million metric tonnes.
On the demand side, China's soybean imports are forecast to exceed 67.5 million tonnes in MY13/14, up from the estimated 60 million tonnes in MY12/13. Back at home, it is estimated by the COOIT, that in 2013-14 season the marketable surplus for crushing would be about 89.80 lakh tonnes as compared to 97 lakh tonnes in 2012-13. The soybean seeds that would be retained for sowing are estimated to be at 9 lakh tonnes as compared to 7.50 lakh tonnes in the previous year. The direct consumption is estimated at 3.50 lakh tonnes as compared to 2.50 lakh tonnes in 2012-13. On the export front, India's soymeal exports may be limited to 4 million tonnes in 2013/14 as rains during the harvest damaged the oilseed crop. Most of it would depend on the magnitude of the rupee factor, which has a direct relation with the volume of exports.
As regard price outlook, in the current scenario, soybean futures are likely to feel some selling pressure with the arrivals coming into the domestic market from the fresh harvest. The counter is likely to face resistance near 4000 levels. The forward curve of soybean futures on NCDEX is in backwardation, which suggests that the soybean prices are likely to trade in the range of 3500-4000 levels, in the first quarter of the calendar year. Going by the seasonality, buying at lower level during the month of April, would possibly be a good strategy keeping in mind a rise of about 5-6% till the month of July, supported by lean season of arrivals. Thereafter, the counter may witness a steep correction of about 10-15% till the month of September, as the fresh harvest of the crop would hit the domestic market. In the last quarter of the year, soybean prices may stabilize near 3000 levels and see some bounce back cushioned by factors such as sustained export demand & lower level buying.
Taking a long term view of U.S soybean futures on CBOT, the forwards month contracts are showing a downtrend owing to the record global soybean production pegged at 284.9 million tonnes, up 1.4 million due to increases for Argentina and Canada. The Soybean futures (Nov '14) is projected at $11.29/bushel, down by more than 12% as compared to the current price.
Yearly price movement of Soyabean futures
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 1187.00 1388.00 1991.00 1919.50 2389.00 2388.00 2521.00 3214.00
High 1448.00 2047.00 2826.00 2824.00 2413.00 2557.00 5064.50 4276.00
Low 1145.00 1345.20 1517.00 1907.00 1878.00 2031.00 2257.00 2838.00
Close 1392.85 1997.00 1909.00 2383.50 2374.50 2514.00 3203.00 3820.00
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
Rs. /Quintal
Note: Currently no future contracts are available in Chilli
®
31
Annual Commentary & Outlook: Mustard Annual Commentary & Outlook: Edible Oil
Mustard
Annual Commentary
Annual Outlook
During the first half of the year, mustard futures on NCDEX
witnessed a fall of 20% from the high of 4290 levels. Due to good
subsoil moisture at the time of sowing & higher sowing, a bearish
trend emerged in the counter. The useful showers during the initial
months of the past year & continuous favourable weather helped to
increase the production. The supply side fundamentals as cited by
the Solvent Extractors' Association of India in the crop survey 2012-
13 showed that overall area had increased to 67.49 lakh hectares.
The yield per hectare had gone up by 24% to 1,103 kg a hectare as
against the previous estimate of 893 kg. The report of COOIT's trade
estimate for Rabi oilseed production and availability during 2012-
13 season, pegged mustard output at 71.50 lakh tonnes, as
compared to 58.80 lakh tonnes in 2011-12. At the beginning of the
last Rabi season, the SEA of India was involved in procurement of
high yielding Gujarat mustard-3 variety (GM-3) & distributed to
progressive farmers in Gujarat, Rajasthan, Madhya Pradesh and
Maharashtra to increase productivity of this commodity. On the
demand front, currency movement as against dollar reaching at all
time low, cushioned the counter & capped the downside. In the later
half of the year, mustard futures managed to take support above
3000 levels. The counter gained by 28% & stabilized near 3700
levels. The export of rapeseed meal during January-October '13
increased by 10% to 760,654 MT, as compared to the same period in
the year 2012. The countries like South Korea, Thailand, Indonesia,
Malaysia, Taiwan & Vietnam turned out to be bigger market for
India. On the international market, rapeseed futures were down by
20% during past year on NYSE Liffe in Paris, dragged down by the
record harvests from Europe to Canada & Ukraine, adding to the
global glut. On the international front, global rapeseed supplies
estimated by Oil World are likely to reach an all-time high of 70
million tons, up 2.5% from a year earlier.
Mustard is following the footsteps of soyabean and couldn't sustain
over the supply pressure. India's mustard production is expected to
increase by 11% to 78 lakh tonnes as projected by the Mustard
Research and Promotion Consortium (MRPC). The favorable
conditions such as high moisture in soil due to delayed rains, dip in
temperatures & a higher minimum support price have encouraged
the farmers of Rajasthan, Gujarat, Madhya Pradesh and
Maharashtra to take up the Rabi crop in a large scale this season.
The sowing of this winter crop has gained momentum & has raised
an expectation of another bumper harvest this year. According to
Range: Rs. 2700-4300
the latest data from the Agriculture department as on 13th
December 2013, the acreage in the key-producing state of
Rajasthan is higher by 2.41 lakh hectares at 29.73 lakh hectares,
while in Uttar Pradesh and Madhya Pradesh, it is marginally lower
than the last year.
Globally, as cited by the U.S Department of Agriculture, the mustard
seed production is projected at a record 70.0 million tonnes, up 2.1
million tonnes due to gains for Canada and Australia. Canadian
rapeseed production is raised 1.9 million tonnes to 18.0 million
tonnes based on the latest survey results from Statistics Canada.
Favorable conditions throughout the growing season resulted in
record mustard seed yields last year.
In days to come, the weather conditions in January will hold the key
to the crop's output size. In the first half of the year, mustard futures
will likely witness a correction towards 2700 levels on account of
supply pressure from the harvest period which is from February to
March, with arrivals peaking till the month of May. On the
international market, the European Union farmers usually plant
winter crops from August to October. The crop lies dormant over
winter and is harvested in summer.
During the second half of the year, the demand for the oilseed is
expected to rise as the timeline shows that consumption of mustard
oil improves prior days to Diwali from household, pickle industries
& remains in pipeline till the winter days are off from the calendar.
The counter is likely to take support near 2700 levels & see an
extended upside towards 4300 level, surpassing 4000 levels.
On the demand side, export scenario of rape meal is likely to remain
sustained as it is being considered as a valuable component in feed
for farm animals.
COMMODITY OUTLOOK 2014
Yearly price movement of Mustard futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 1650.00 1837.50 2300.75 2930.00 3040.50 2855.00 3722.00 4170.00
High 2045.00 2465.00 3375.00 3169.00 3090.00 3776.00 4538.00 4290.00
Low 1605.00 1610.50 2300.50 2160.50 2319.00 2724.00 3235.00 3020.00
Close 1866.75 2308.25 2914.25 3034.50 2846.50 3776.00 4179.00 3660.00
0.00
500.00
1000.00
1500.00
2000.00
2500.00
3000.00
3500.00
4000.00
4500.00
5000.00
Rs. /Quintal
Edible Oil
Annual Commentary
During 2013, crude palm oil futures on MCX outperformed among
the edible oil complex rising by more than 25% making a high at
585.10 levels. On the Bursa Malaysia Derivatives Exchange, the
counter witnessed a rise of about 9%, taking support at 2130 levels.
The ringgit fell towards 3.3345 per dollar, by about 12.88%, which
boosted the buying from the overseas buyers. However, the upside
was seen capped near 2700 levels, as output from Malaysia rose to a
13-month high of 1.97 million tonnes in October, while inventories
climbed to 1.85 million tonnes, the largest since April, data from the
Malaysian Palm Oil Board showed.
Back at home, refined soy oil futures on the national bourse
consolidated in the broader range of 650-750 levels. The
fundamentals that supported the rise were increasing
consumption of vegetable oil, lesser availability of the competing
soy oil in the domestic market & a steep fall in the rupee as against
dollar, making the import costlier. The rupee hit a record low
against the dollar at 68.85 in August, but firmed slightly after that to
settle down near 62.60 levels. For the year, the rupee is down by
17.87%. Most of the India's cooking oil demand which is about 17-
18 million tonnes, is met from its import which comes from
Malaysia and Indonesia.
Overall production of the vegetable oils was almost stagnant at 8
million tonnes in 2012-13, as compared to 8.1 million tonnes in
2011-12, while consumption rose by 3%, due to increase in per
capita consumption (3%) and population growth (1.76%). As cited
by the Solvent Extractors' Association of India, India's overseas
purchases of vegetable oil during Oil Year 2012-13 (Nov.'12 to
Oct.'13) i.e. edible oil and non-edible oil in 1st quarter of the oil year
was higher. However in the 2nd quarter it maintained the same
level. In the 3rd quarter, import increased by 8.02%. But in 4th
quarter, import is down by 9.68%. The overall import increased by
4.77% over the previous Oil Year. On the contrary, the stockpiles of
cooking oils at Indian ports dropped to 14.0 lakh tonnes as
compared to 15.7 lakh tonnes as on 31st October, 2012.
Annual Outlook
Edible Oil Complex
Range: Ref. Soya Rs. 600-780
CPO (MCX) Rs. 450-630
CPO (BMD) MYR 2100-3000
On the supply side, as per the COOIT's estimate, the vegetable oil
available in 2013-14 season from Kharif oilseeds crop and the
secondary sources are estimated at 58.03 lakh tonnes as compared
to 52.65 lakh tonnes in 2012-13.
The Cabinet Committee on Economic Affairs has approved the
implementation of the National Mission on Oilseeds and Oil Palm
(NMOOP) during the 12th Plan Period with financial allocation of
Rs.3507 crore. This would help in enhancing production of oilseeds
by 6.58 million tonnes. This would also bring additional area of 1.25
lakh hectares under Oil Palm cultivation with increase in
productivity of fresh fruit bunches from 4927 kg/ha to 15,000
kg/ha and increase in collection of tree borne oilseeds to 14 lakh
tonne. Implementation of the proposed Mission would enhance
production of vegetable oil sources by 2.48 million tonnes from
oilseeds (1.70 million tonnes), oil palm (0.60 million tonnes) and
tree borne oilseeds (0.18 million tonnes) by the end of the 12th Plan
Period.
India being dependent on the imports from Malaysian & Indonesia
to fill the gap between demand & supply, the forecast of oil imports
(edible oil & non-edible oil) for the oil year 2013-14 (Nov-Oct) is
estimated to be at 112 lakh tonnes as compared to 106 lakh tonnes
in 2012-13. The major reason is an inverse duty structure in major
exporting countries such as Malaysia and Indonesia, coupled with
narrowing import duty differential between crude and refined oil.
At present, the import duty on refined oils is at 7.5%, on crude
edible oil is about 2.50%. Industry body Solvent Extractors
Association (SEA) has been demanding a hike in import duty of
refined oils to 12.50% to curb imports and protect domestic
refineries.
Due to inverted duty structure, Indian traders are favouring import
of refined edible oil rather than of crude oils. Inverted duty
structure impacts the domestic industry adversely as it has to pay a
higher price for raw material in terms of duty, while the finished
product lands at lower duty and costs low. Market participants
would be keeping a close watch on the outcomes of the proposal to
restructure import duty on refined edible oils and crude
(vegetable) oils.
Currently, the stock of edible oils as on 1st December, 2013 at various
ports is estimated at 590,000 tons and about 880,000 tons in pipelines.
COMMODITY OUTLOOK 2014
®
32®
33
Annual Commentary & Outlook: Mustard Annual Commentary & Outlook: Edible Oil
Mustard
Annual Commentary
Annual Outlook
During the first half of the year, mustard futures on NCDEX
witnessed a fall of 20% from the high of 4290 levels. Due to good
subsoil moisture at the time of sowing & higher sowing, a bearish
trend emerged in the counter. The useful showers during the initial
months of the past year & continuous favourable weather helped to
increase the production. The supply side fundamentals as cited by
the Solvent Extractors' Association of India in the crop survey 2012-
13 showed that overall area had increased to 67.49 lakh hectares.
The yield per hectare had gone up by 24% to 1,103 kg a hectare as
against the previous estimate of 893 kg. The report of COOIT's trade
estimate for Rabi oilseed production and availability during 2012-
13 season, pegged mustard output at 71.50 lakh tonnes, as
compared to 58.80 lakh tonnes in 2011-12. At the beginning of the
last Rabi season, the SEA of India was involved in procurement of
high yielding Gujarat mustard-3 variety (GM-3) & distributed to
progressive farmers in Gujarat, Rajasthan, Madhya Pradesh and
Maharashtra to increase productivity of this commodity. On the
demand front, currency movement as against dollar reaching at all
time low, cushioned the counter & capped the downside. In the later
half of the year, mustard futures managed to take support above
3000 levels. The counter gained by 28% & stabilized near 3700
levels. The export of rapeseed meal during January-October '13
increased by 10% to 760,654 MT, as compared to the same period in
the year 2012. The countries like South Korea, Thailand, Indonesia,
Malaysia, Taiwan & Vietnam turned out to be bigger market for
India. On the international market, rapeseed futures were down by
20% during past year on NYSE Liffe in Paris, dragged down by the
record harvests from Europe to Canada & Ukraine, adding to the
global glut. On the international front, global rapeseed supplies
estimated by Oil World are likely to reach an all-time high of 70
million tons, up 2.5% from a year earlier.
Mustard is following the footsteps of soyabean and couldn't sustain
over the supply pressure. India's mustard production is expected to
increase by 11% to 78 lakh tonnes as projected by the Mustard
Research and Promotion Consortium (MRPC). The favorable
conditions such as high moisture in soil due to delayed rains, dip in
temperatures & a higher minimum support price have encouraged
the farmers of Rajasthan, Gujarat, Madhya Pradesh and
Maharashtra to take up the Rabi crop in a large scale this season.
The sowing of this winter crop has gained momentum & has raised
an expectation of another bumper harvest this year. According to
Range: Rs. 2700-4300
the latest data from the Agriculture department as on 13th
December 2013, the acreage in the key-producing state of
Rajasthan is higher by 2.41 lakh hectares at 29.73 lakh hectares,
while in Uttar Pradesh and Madhya Pradesh, it is marginally lower
than the last year.
Globally, as cited by the U.S Department of Agriculture, the mustard
seed production is projected at a record 70.0 million tonnes, up 2.1
million tonnes due to gains for Canada and Australia. Canadian
rapeseed production is raised 1.9 million tonnes to 18.0 million
tonnes based on the latest survey results from Statistics Canada.
Favorable conditions throughout the growing season resulted in
record mustard seed yields last year.
In days to come, the weather conditions in January will hold the key
to the crop's output size. In the first half of the year, mustard futures
will likely witness a correction towards 2700 levels on account of
supply pressure from the harvest period which is from February to
March, with arrivals peaking till the month of May. On the
international market, the European Union farmers usually plant
winter crops from August to October. The crop lies dormant over
winter and is harvested in summer.
During the second half of the year, the demand for the oilseed is
expected to rise as the timeline shows that consumption of mustard
oil improves prior days to Diwali from household, pickle industries
& remains in pipeline till the winter days are off from the calendar.
The counter is likely to take support near 2700 levels & see an
extended upside towards 4300 level, surpassing 4000 levels.
On the demand side, export scenario of rape meal is likely to remain
sustained as it is being considered as a valuable component in feed
for farm animals.
COMMODITY OUTLOOK 2014
Yearly price movement of Mustard futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 1650.00 1837.50 2300.75 2930.00 3040.50 2855.00 3722.00 4170.00
High 2045.00 2465.00 3375.00 3169.00 3090.00 3776.00 4538.00 4290.00
Low 1605.00 1610.50 2300.50 2160.50 2319.00 2724.00 3235.00 3020.00
Close 1866.75 2308.25 2914.25 3034.50 2846.50 3776.00 4179.00 3660.00
0.00
500.00
1000.00
1500.00
2000.00
2500.00
3000.00
3500.00
4000.00
4500.00
5000.00
Rs. /Quintal
Edible Oil
Annual Commentary
During 2013, crude palm oil futures on MCX outperformed among
the edible oil complex rising by more than 25% making a high at
585.10 levels. On the Bursa Malaysia Derivatives Exchange, the
counter witnessed a rise of about 9%, taking support at 2130 levels.
The ringgit fell towards 3.3345 per dollar, by about 12.88%, which
boosted the buying from the overseas buyers. However, the upside
was seen capped near 2700 levels, as output from Malaysia rose to a
13-month high of 1.97 million tonnes in October, while inventories
climbed to 1.85 million tonnes, the largest since April, data from the
Malaysian Palm Oil Board showed.
Back at home, refined soy oil futures on the national bourse
consolidated in the broader range of 650-750 levels. The
fundamentals that supported the rise were increasing
consumption of vegetable oil, lesser availability of the competing
soy oil in the domestic market & a steep fall in the rupee as against
dollar, making the import costlier. The rupee hit a record low
against the dollar at 68.85 in August, but firmed slightly after that to
settle down near 62.60 levels. For the year, the rupee is down by
17.87%. Most of the India's cooking oil demand which is about 17-
18 million tonnes, is met from its import which comes from
Malaysia and Indonesia.
Overall production of the vegetable oils was almost stagnant at 8
million tonnes in 2012-13, as compared to 8.1 million tonnes in
2011-12, while consumption rose by 3%, due to increase in per
capita consumption (3%) and population growth (1.76%). As cited
by the Solvent Extractors' Association of India, India's overseas
purchases of vegetable oil during Oil Year 2012-13 (Nov.'12 to
Oct.'13) i.e. edible oil and non-edible oil in 1st quarter of the oil year
was higher. However in the 2nd quarter it maintained the same
level. In the 3rd quarter, import increased by 8.02%. But in 4th
quarter, import is down by 9.68%. The overall import increased by
4.77% over the previous Oil Year. On the contrary, the stockpiles of
cooking oils at Indian ports dropped to 14.0 lakh tonnes as
compared to 15.7 lakh tonnes as on 31st October, 2012.
Annual Outlook
Edible Oil Complex
Range: Ref. Soya Rs. 600-780
CPO (MCX) Rs. 450-630
CPO (BMD) MYR 2100-3000
On the supply side, as per the COOIT's estimate, the vegetable oil
available in 2013-14 season from Kharif oilseeds crop and the
secondary sources are estimated at 58.03 lakh tonnes as compared
to 52.65 lakh tonnes in 2012-13.
The Cabinet Committee on Economic Affairs has approved the
implementation of the National Mission on Oilseeds and Oil Palm
(NMOOP) during the 12th Plan Period with financial allocation of
Rs.3507 crore. This would help in enhancing production of oilseeds
by 6.58 million tonnes. This would also bring additional area of 1.25
lakh hectares under Oil Palm cultivation with increase in
productivity of fresh fruit bunches from 4927 kg/ha to 15,000
kg/ha and increase in collection of tree borne oilseeds to 14 lakh
tonne. Implementation of the proposed Mission would enhance
production of vegetable oil sources by 2.48 million tonnes from
oilseeds (1.70 million tonnes), oil palm (0.60 million tonnes) and
tree borne oilseeds (0.18 million tonnes) by the end of the 12th Plan
Period.
India being dependent on the imports from Malaysian & Indonesia
to fill the gap between demand & supply, the forecast of oil imports
(edible oil & non-edible oil) for the oil year 2013-14 (Nov-Oct) is
estimated to be at 112 lakh tonnes as compared to 106 lakh tonnes
in 2012-13. The major reason is an inverse duty structure in major
exporting countries such as Malaysia and Indonesia, coupled with
narrowing import duty differential between crude and refined oil.
At present, the import duty on refined oils is at 7.5%, on crude
edible oil is about 2.50%. Industry body Solvent Extractors
Association (SEA) has been demanding a hike in import duty of
refined oils to 12.50% to curb imports and protect domestic
refineries.
Due to inverted duty structure, Indian traders are favouring import
of refined edible oil rather than of crude oils. Inverted duty
structure impacts the domestic industry adversely as it has to pay a
higher price for raw material in terms of duty, while the finished
product lands at lower duty and costs low. Market participants
would be keeping a close watch on the outcomes of the proposal to
restructure import duty on refined edible oils and crude
(vegetable) oils.
Currently, the stock of edible oils as on 1st December, 2013 at various
ports is estimated at 590,000 tons and about 880,000 tons in pipelines.
COMMODITY OUTLOOK 2014
®
32®
33
Annual Commentary & Outlook: SugarAnnual Commentary & Outlook: Edible Oil COMMODITY OUTLOOK 2014
On the demand side, as the edible oils constitutes an important
component of food expenditure in Indian households, the per
capita consumption is seen rising by 3 to 4% per annum. This
increasing trend is driven by growing population, rising income
levels and improved supply conditions. The per capita edible oil
consumption in India is increasing (currently estimated at 14.04 kg
for MY 2012/13); however, this remains far below the estimated
world average per capita consumption of 22.4 kg.
The fundamentals of the international market show that
Indonesian output will decline for the first time since 1998.
Meanwhile in Malaysia, the output may decline as the recent floods
have damaged several palm-growing parts. On the other hand, the
Malaysian inventories at 1.98 million tonnes are still 23% lower
than the 2.57 million tonnes in November 2012.
Giving a spot light on the export duty, Malaysia left a tax on exports
of the crude variety unchanged after stockpiles jumped to the
highest since March. Indonesia raised the export tax to 12% for
December from 9% in November.
Regarding the price outlook, palm oil on the Bursa Malaysia
Derivative is likely to maintain a support above 2100 levels. The
upside may remain driven by increased use of palm-based biodiesel
& versatility of palm oil through its vast applications in different
industries from soaps to instant noodles & chocolate. Besides the
top palm oil market like China, India, Bangladesh & Pakistan, the
countries like the Middle East and North Africa are becoming the
emerging markets. During the period January to October, the
counter may consolidate in the range of 2250-2850 levels, as the
production is typically highest from July to October because of
growing cycles. An upside may be seen in the last quarter of the year,
when the output tapers off from November with January and
February usually recording the lowest production.
Back at home, crude palm oil futures may remain continue to face
resistance near 630 levels & witness a correction due to lack of
demand as it solidifies during winters. With the onset of summer
season, the counter is likely to fall further towards 450 levels,
breaching 540 levels, by the month of August-September in this
year. On similar line, refined soy oil futures may witness a fall
towards 600 levels, facing a resistance near 780 levels.
In the last quarter of the year the edible oil complex may witness a
rise of 10-15%, supported by the seasonal demand during winters
& marriages. Market participants would also be keeping a close
watch on the movement of Rupee, which will continue to influence
the buying spree & the volume of imports.
Yearly price movement of Refined soy oil futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 339.10 469.15 553.10 471.60 489.90 636.00 738.00 697.95
High 478.30 559.15 729.20 525.90 635.50 735.50 817.00 760.80
Low 337.70 431.45 436.85 418.00 437.50 588.50 611.50 628.00
Close 471.25 552.70 468.05 487.85 632.55 733.50 695.80 695.80
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
900.00
Rs/10Kgs
Yearly price movement of CPO futures (MCX)
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 168.00 234.20 526.30 274.80 366.20 562.00 548.00 435.10
High 234.20 234.20 534.80 415.50 547.00 591.00 632.20 585.10
Low 157.00 227.00 228.50 264.60 344.20 459.20 393.00 426.40
Close 234.20 228.50 263.60 355.60 544.20 546.50 417.10 550.60
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
Rs/10Kgs
Sugar
Annual Commentary
Annual Outlook
Since the beginning of the year, sugar prices at the spot market as
well as on the national bourse witnessed a steep downside, prices
fell by more than 15%. Mill level rates for S-grade dropped below Rs
2,800 a quintal on the lower side, while on NCDEX the counter
tested low at 2680 levels. The factors such as lack of demand and
mounting selling pressure dragged down the sweetener prices
throughout the year. At the spot market, the upcountry buyers
sourced their needs locally hence producers were forced to sell in
the local markets. The stockists preferred to keep themselves away
from bulk buying, as the supplies were ample. Moreover, the
counter remained subdued as the mills continuously sold sugar to
cut stocks & preferred to import cheap sugar from the various
foreign destinations even though there was self-sufficiency within
the country. The average production cost was calculated at around
Rs. 36,000/tonne while the market price hovered around Rs
31,000-32,000/tonne, handing over a net loss of Rs 4000/tonne.
The estimated output was about 24 million tonne, leaving 1.5
million tonne in excess after meeting the domestic demand of 22.5
million tonne. On the other hand, exports have been negligible in
the 2012-13 season. However, in mid-year the Centre decided to
raise the Customs duty on sugar to 15% to discourage overseas
buying. During the past year, in major developments, the
government relaxed its penal norm of automatically converting
unsold sugar into levy sugar in the given period of release from
December to March. This outcome eased the pressure on mills to
sell their sugar quota within the given timeframe, checking the
crash in sugar prices. Secondly, the government gave freedom to
sugar factories to sell their open market quota. Lastly, Cabinet
Committee on Economic Affairs (CCEA) finally decided to decontrol
sugar with certain riders. Taking into account, all the bearish
fundamentals, the 2012-13 season ended on bearish note with
carry-forward stocks of 8.8 million tonnes. On the international
market, sugar prices in New York had dropped to a 3-1/2-year low,
pressurized by rising prospects for higher output in Brazil.
The sweetening agent, sugar may continue to trap in bearish zone
on smoother supply side amid the steady demand, like 2013. The
seasonal demand during summer may limit the downside. On the
supply side, the 2013-14 marketing year began with carry-forward
stocks of 8.8 million tonnes, near to 5 year high. It is expected that
by the close of the season on Sept. 30, 2014, the inventory may surge
further to 10 million tonnes. The demand side fundamentals reveal
that annual sugar consumption is of around 23 million tonnes &
there is an opportunity to export 3 to 4 million tonnes. However, the
export window seems to be bleak as the sugar prices in New York
Range: Rs. 2400-3200
are at 16.81 cents a pound, the longest slump of by 114% since
February 2011. As cited by the U.S. Department of Agriculture, the
global stockpiles are likely to reach an all-time high of 43.379
million metric tonnes in the marketing period ending in 2014.
Apart from the supply side, there is U.P issue also which can give
significant impact on the prices. The current year sugar season
(2013-14) in Uttar Pradesh began with an arrangement of mills
agreeing to pay farmers Rs.280 per quintal in two installments i.e
Rs.260 per quintal immediately and Rs.20 per quintal before the
end of present crushing season. The Government approved
modalities for providing interest-free loans worth Rs 6,600 crore to
the sugar industry for payment of cane price arrears.
This year, market participants will be closely eyeing on the proposal
to link the sugarcane price with the sugar prices in the next
crushing season. The Rangarajan Committee appointed by the
Central Government, has recommended adoption of either of the
following two formulas: a) Cane price should be 70% of the revenue
realized from sugar, bagasse, molasses and press mud, or b) Cane
price should be 75% of the revenue realized from sugar only (giving
5% weightage to revenue from the first stage by-products).
Regarding the price outlook of sugar futures on NCDEX, in mid-term
till the month of May, the counter may extend its fall towards 2400
levels, breaching 2700. Globally, a selling pressure is likely to mount
during this period as supplies would be in its peak due to Brazil's
sugar cane harvest season which runs from April to June.
Thereafter till the year end the factors such as lower level buying,
seasonal demand during summer season, followed by festivities
will possibly give lend support, on account of which sugar futures
may test 3200 levels.
Yearly price movement of Sugar futures
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 1830.00 1640.00 1330.00 1862.00 3049.00 2979.00 2875.00 3238.00
High 2110.00 1675.00 1934.00 3555.00 3079.00 3065.00 3672.00 3267.00
Low 1644.00 1182.00 1321.00 1862.00 2968.00 2421.00 2635.00 2680.00
Close 1652.00 1334.00 1866.00 3516.00 2973.00 2881.00 3238.00 2726.00
0.00
500.00
1000.00
1500.00
2000.00
2500.00
3000.00
3500.00
4000.00
Rs. /Quintal
®
34®
35
Annual Commentary & Outlook: SugarAnnual Commentary & Outlook: Edible Oil COMMODITY OUTLOOK 2014
On the demand side, as the edible oils constitutes an important
component of food expenditure in Indian households, the per
capita consumption is seen rising by 3 to 4% per annum. This
increasing trend is driven by growing population, rising income
levels and improved supply conditions. The per capita edible oil
consumption in India is increasing (currently estimated at 14.04 kg
for MY 2012/13); however, this remains far below the estimated
world average per capita consumption of 22.4 kg.
The fundamentals of the international market show that
Indonesian output will decline for the first time since 1998.
Meanwhile in Malaysia, the output may decline as the recent floods
have damaged several palm-growing parts. On the other hand, the
Malaysian inventories at 1.98 million tonnes are still 23% lower
than the 2.57 million tonnes in November 2012.
Giving a spot light on the export duty, Malaysia left a tax on exports
of the crude variety unchanged after stockpiles jumped to the
highest since March. Indonesia raised the export tax to 12% for
December from 9% in November.
Regarding the price outlook, palm oil on the Bursa Malaysia
Derivative is likely to maintain a support above 2100 levels. The
upside may remain driven by increased use of palm-based biodiesel
& versatility of palm oil through its vast applications in different
industries from soaps to instant noodles & chocolate. Besides the
top palm oil market like China, India, Bangladesh & Pakistan, the
countries like the Middle East and North Africa are becoming the
emerging markets. During the period January to October, the
counter may consolidate in the range of 2250-2850 levels, as the
production is typically highest from July to October because of
growing cycles. An upside may be seen in the last quarter of the year,
when the output tapers off from November with January and
February usually recording the lowest production.
Back at home, crude palm oil futures may remain continue to face
resistance near 630 levels & witness a correction due to lack of
demand as it solidifies during winters. With the onset of summer
season, the counter is likely to fall further towards 450 levels,
breaching 540 levels, by the month of August-September in this
year. On similar line, refined soy oil futures may witness a fall
towards 600 levels, facing a resistance near 780 levels.
In the last quarter of the year the edible oil complex may witness a
rise of 10-15%, supported by the seasonal demand during winters
& marriages. Market participants would also be keeping a close
watch on the movement of Rupee, which will continue to influence
the buying spree & the volume of imports.
Yearly price movement of Refined soy oil futures
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 339.10 469.15 553.10 471.60 489.90 636.00 738.00 697.95
High 478.30 559.15 729.20 525.90 635.50 735.50 817.00 760.80
Low 337.70 431.45 436.85 418.00 437.50 588.50 611.50 628.00
Close 471.25 552.70 468.05 487.85 632.55 733.50 695.80 695.80
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
900.00
Rs/10Kgs
Yearly price movement of CPO futures (MCX)
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 168.00 234.20 526.30 274.80 366.20 562.00 548.00 435.10
High 234.20 234.20 534.80 415.50 547.00 591.00 632.20 585.10
Low 157.00 227.00 228.50 264.60 344.20 459.20 393.00 426.40
Close 234.20 228.50 263.60 355.60 544.20 546.50 417.10 550.60
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
Rs/10Kgs
Sugar
Annual Commentary
Annual Outlook
Since the beginning of the year, sugar prices at the spot market as
well as on the national bourse witnessed a steep downside, prices
fell by more than 15%. Mill level rates for S-grade dropped below Rs
2,800 a quintal on the lower side, while on NCDEX the counter
tested low at 2680 levels. The factors such as lack of demand and
mounting selling pressure dragged down the sweetener prices
throughout the year. At the spot market, the upcountry buyers
sourced their needs locally hence producers were forced to sell in
the local markets. The stockists preferred to keep themselves away
from bulk buying, as the supplies were ample. Moreover, the
counter remained subdued as the mills continuously sold sugar to
cut stocks & preferred to import cheap sugar from the various
foreign destinations even though there was self-sufficiency within
the country. The average production cost was calculated at around
Rs. 36,000/tonne while the market price hovered around Rs
31,000-32,000/tonne, handing over a net loss of Rs 4000/tonne.
The estimated output was about 24 million tonne, leaving 1.5
million tonne in excess after meeting the domestic demand of 22.5
million tonne. On the other hand, exports have been negligible in
the 2012-13 season. However, in mid-year the Centre decided to
raise the Customs duty on sugar to 15% to discourage overseas
buying. During the past year, in major developments, the
government relaxed its penal norm of automatically converting
unsold sugar into levy sugar in the given period of release from
December to March. This outcome eased the pressure on mills to
sell their sugar quota within the given timeframe, checking the
crash in sugar prices. Secondly, the government gave freedom to
sugar factories to sell their open market quota. Lastly, Cabinet
Committee on Economic Affairs (CCEA) finally decided to decontrol
sugar with certain riders. Taking into account, all the bearish
fundamentals, the 2012-13 season ended on bearish note with
carry-forward stocks of 8.8 million tonnes. On the international
market, sugar prices in New York had dropped to a 3-1/2-year low,
pressurized by rising prospects for higher output in Brazil.
The sweetening agent, sugar may continue to trap in bearish zone
on smoother supply side amid the steady demand, like 2013. The
seasonal demand during summer may limit the downside. On the
supply side, the 2013-14 marketing year began with carry-forward
stocks of 8.8 million tonnes, near to 5 year high. It is expected that
by the close of the season on Sept. 30, 2014, the inventory may surge
further to 10 million tonnes. The demand side fundamentals reveal
that annual sugar consumption is of around 23 million tonnes &
there is an opportunity to export 3 to 4 million tonnes. However, the
export window seems to be bleak as the sugar prices in New York
Range: Rs. 2400-3200
are at 16.81 cents a pound, the longest slump of by 114% since
February 2011. As cited by the U.S. Department of Agriculture, the
global stockpiles are likely to reach an all-time high of 43.379
million metric tonnes in the marketing period ending in 2014.
Apart from the supply side, there is U.P issue also which can give
significant impact on the prices. The current year sugar season
(2013-14) in Uttar Pradesh began with an arrangement of mills
agreeing to pay farmers Rs.280 per quintal in two installments i.e
Rs.260 per quintal immediately and Rs.20 per quintal before the
end of present crushing season. The Government approved
modalities for providing interest-free loans worth Rs 6,600 crore to
the sugar industry for payment of cane price arrears.
This year, market participants will be closely eyeing on the proposal
to link the sugarcane price with the sugar prices in the next
crushing season. The Rangarajan Committee appointed by the
Central Government, has recommended adoption of either of the
following two formulas: a) Cane price should be 70% of the revenue
realized from sugar, bagasse, molasses and press mud, or b) Cane
price should be 75% of the revenue realized from sugar only (giving
5% weightage to revenue from the first stage by-products).
Regarding the price outlook of sugar futures on NCDEX, in mid-term
till the month of May, the counter may extend its fall towards 2400
levels, breaching 2700. Globally, a selling pressure is likely to mount
during this period as supplies would be in its peak due to Brazil's
sugar cane harvest season which runs from April to June.
Thereafter till the year end the factors such as lower level buying,
seasonal demand during summer season, followed by festivities
will possibly give lend support, on account of which sugar futures
may test 3200 levels.
Yearly price movement of Sugar futures
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 1830.00 1640.00 1330.00 1862.00 3049.00 2979.00 2875.00 3238.00
High 2110.00 1675.00 1934.00 3555.00 3079.00 3065.00 3672.00 3267.00
Low 1644.00 1182.00 1321.00 1862.00 2968.00 2421.00 2635.00 2680.00
Close 1652.00 1334.00 1866.00 3516.00 2973.00 2881.00 3238.00 2726.00
0.00
500.00
1000.00
1500.00
2000.00
2500.00
3000.00
3500.00
4000.00
Rs. /Quintal
®
34®
35
Annual Commentary & Outlook: Wheat Annual Commentary & Outlook: Kapas
Wheat
Annual Commentary
Annual Outlook
During the past year, wheat futures on the national bourse had been
on a roller-coaster ride. The counter fell from high of 1595 levels to
1370 levels during the first quarter & then against it made a high of
1688 levels. The announcement of Rs 65 per quintal hike in the
support price of wheat to Rs 1,350 per quintal, raised the prospects
of higher output. In March, farmers in India began to harvest the
sixth consecutive wheat crop that was expected to exceed demand.
India, the world's second-biggest wheat grower, had produced a
record output of 92.46 million tonnes. On November 1, India's
wheat stocks stood at 34 million tonnes, three times more than the
target for the Oct-Dec quarter. The carryover of centrally held wheat
stocks still grew by 4.2 million tonnes on a year-over-year basis, to
24.2 million tonnes, the highest since 2001/02. However, the record
fall in rupee to 68.80 levels emerged as a positive fundamental
factor for the counter. Wheat futures rebounded, pushed by the
higher exports. As cited by the International Grain Council, during
the 2012/13 (Apr/Mar) marketing year, India's wheat shipments
soared to 6.7 million tonnes. Furthermore, to push more exports
the Government has reduced the floor price for wheat exports by
$40 a tonne to $260. This step was taken to make Indian wheat
shipments more viable in the global market. Indian wheat
competes with grain from the Black Sea region. On the Chicago
Board of Trade, wheat tumbled by 16% in the past year. As
estimated by the United Nations' Food & Agriculture Organization,
the global wheat harvest was seen at a record of 708.5 million
tonnes. According to U.S Dept. of Agriculture, world wheat stocks
were projected at 2.2 million tonnes higher with the biggest
increases for the European Union, Canada and Argentina.
This essential commodity may give a sigh of relief to the consumers
as smooth supply should be able to satisfy the appetite of
consumers without difficulty. Although, seasonality may give
chance to both bulls and bears with limited swings in the prices.
In 2013-14, India is likely to achieve wheat production target of
92.5 million tonnes, as the storage water level in country's 85 major
reservoirs is the highest in the last 10 years. As reported, the water
level in the reservoirs was 78% or 121.389 Billion Cubic Metres
(BCM) of the 154.877 BCM capacity, as on November 27, 2013.
Moreover, acting on the recommendations of the Commission for
Agricultural Costs and Prices, the Government has fixed Minimum
Support Price (MSP) of wheat for the Agricultural Year (July-June)
2013-14 at Rs.1350 per quintal. The farmers of Madhya Pradesh are
encouraged to take up wheat cultivation this year attracted by the
additional bonus the State Government.
Range: Rs. 1450-1900
On the export front, buoyed by better response the state entities such as MMTC (Metals and Minerals Trading Corporation of India), STC (State Trading Corporation) and PEC Ltd (A Premier International Trading Company) have invited bids to ship out 6.5 lakh tonnes. This is to take advantage of current global prices, also lower availability from Russia and Ukraine on account of severe winter. The government has reduced the base price for export from $300 a tonne to $260 a tonne to clear the heft stocks from the warehouses, before the arrival of the new crop. As cited by the USDA (U.S. Department of Agriculture), MY 2013/14 wheat exports are likely to reach 6.0 million metric tonnes. According to Food Corporation of India, wheat stocks in state godowns were estimated at 34 million tonnes as on November 1, against the requirement of 14 million tonnes.
Since inception, looking at the uptrend in Wheat futures on the national bourse, quoting at 1685 levels, near the all time high of 1700 levels is expected to trade with an upside bias. However, during the first three months of the year, the counter may witness some correction as the supplies from the harvest of Rabi crop may exert a downside pressure. Thereafter, till the month of July, it may consolidate taking support above 1450 levels with upside getting capped on account of harvest in major producing countries such as China, U.S & EU-25. By the year end, factors such as lower level buying, seasonal demand during marriage season demand & festivities may add to the upside momentum for 1900 levels.
In 2014, wheat prices internationally may witness a bearish movement, thanks to the strong global supplies. As cited by the International Grain Council, looking ahead to 2014/15, winter wheat planting is nearly complete in the northern hemisphere, and the global wheat harvested area is projected to expand by 1.4%, to about 223 million hectares. The forecast for world wheat production has been pegged at 698 million tonnes, total use is anticipated at 692 million tonnes, world trade is seen at 142 million tonnes and the end-season stocks projection is estimated at 181 million tonnes.
COMMODITY OUTLOOK 2014
Yearly price movement of Wheat futures
Source: Reuters & SMC Research
2006 2007 2009 2010 2011 2012 2013
Open 799.00 1025.00 1135.00 1340.00 1335.00 1236.00 1589.00
High 1145.80 1139.80 1461.00 1460.00 1435.00 1705.00 1688.00
Low 765.00 940.00 1052.20 1112.20 1025.00 1111.00 1370.00
Close 1008.40 1018.60 1343.20 1337.00 1237.00 1592.00 1671.00
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
1400.00
1600.00
1800.00
Rs. /Quintal
Kapas
Annual Commentary
Annual Outlook
During the first half of the year, Kapas futures swung between gains
and losses due to mixed fundamentals. The counter witnessed a
high of 1100 levels, as registration for exporting cotton yarn was
seen at a high of at least two years, owing to the burgeoning demand
from Bangladesh and China. The Cotton Advisory Board scaled up
the export and import estimates for the commodity for cotton year
2012-13 (October-September). However, by the year end, the
commodity headed down towards 920 levels. The Cotton
Corporation of India began selling its stocks built through market
intervention operations as part of the Government efforts to hold
the natural fibre's price line. Adding to the bearish sentiments,
cotton exports dropped by 31% to 9.8 million bales in 2012-13
marketing year, but imports rose slightly to 1.47 million bales in the
same period. China's slow purchase hit the cotton prices globally,
sending the prices to a 10-month low as investors and traders
fretted that China was gearing up to release cotton from its
stockpile. China cut its purchases of domestic cotton for state
reserves in 2013 to 731,050 tonnes, down 41% compared with the
same period last year, according to data from the China Cotton
Information Center. Bearish sentiments took a grip on the counter
and estimates also showed that the India's output would climb to a
record as above-average monsoon rainfall increased planting.
Cotton Advisory Board (CAB) revised India's cotton production
estimate upwards to 34 million bales for 2012-13 from 26.5 million
bales.
The fundamentals of the domestic market as cited by the Cotton
Association of India show that the Indian cotton output for 2013-14
(Oct-Sep) has been estimated at 38.05 million bales. It includes a
carryover stock of cotton on Oct 1 at 4.3 million bales and imports at
1.5 million bales. The cotton yield in India is expected to be only 540
kg per hectare in 2013-14, slightly higher than last year's yield of
517 kg per hectare. In 2013-14, the total demand has been pegged
at 30.0 million bales, which would leave a surplus of 13.8 million
bales next season. On the demand side, much will depend on China's
import policies, movement of rupee as against dollar, competitive
pricing and adequate supplies, which are expected to sustain
interest in Indian cotton among foreign buyers.
As regards China, MY13/14 imports are forecast down significantly
at 2.2 million tonnes as massive state stocks, import constraints and
slowing consumption would influence a slowing down of demand.
In the supply side, the total cotton reserves of China are expected to
grow as the country continues to purchase under its price support
Range: Rs. 850-1100
program. In a related note, a modification of the government cotton
support policy is currently under consideration and may be
announced in 2014. Based on a recent survey by China's National
Cotton Market Monitoring Network, MY13/14 cotton production is
estimated at 6.67 million tonnes, down by 12.30% as compared to
MY12/13. The average yield is forecasted down by 9.30% to 1,415
Kg per hectare due to unfavorable weather impacts.
Regarding the price outlook, cotton prices on the domestic market
during the initial months of the year may remain range bound with
upside getting capped, as the commodity would be amidst the peak
arrival season & limited buying from mills. However, Kapas futures
on NCDEX (Apr) is expected to take support above 850 levels. In the
current scenario, the farmers are holding back their produce in
expectation of getting a better price of about Rs 1,000 a 20 kg.
During the period from March till September, the counter may
witness a downfall by about 6% moving in lock steps with the
seasonality pattern of cotton futures traded on the Intercontinental
Exchange (ICE). The counter may also get pressurized by China's
cotton auction from its stockpile. As cited by the International
Cotton Advisory Committee (ICAC), Beijing will sell about 2-3
million tonnes of cotton from its huge state reserves. Adding to the
bearish fundamental, the world demand & supply situation as
estimated by the International Cotton Advisory Committee, would
witness a record global cotton inventories by the end of the
2013/14 crop year. The world inventories will total 20.3 million
tonnes by July 31 next year, 10% higher than inventories in the
previous season.
By the end of the calendar year, from September till December,
factors such as seasonal demand and lean season of arrivals in the
domestic market may prove beneficial to the investors. The
seasonality pattern shows that during this period Kapas futures get
expensive by about 9%.
COMMODITY OUTLOOK 2014
Yearly price movement of Kapas futures
Source: Reuters & SMC Research
2007 2009 2010 2011 2012 2013
Open 400.00 548.60 666.90 749.50 822.00 985.00
High 429.00 695.80 775.00 1262.00 1184.00 1105.00
Low 398.90 516.00 570.00 630.10 801.00 874.00
Close 421.70 666.10 747.60 817.10 982.00 952.50
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
1400.00
Rs/20Kgs
®
36®
37
Annual Commentary & Outlook: Wheat Annual Commentary & Outlook: Kapas
Wheat
Annual Commentary
Annual Outlook
During the past year, wheat futures on the national bourse had been
on a roller-coaster ride. The counter fell from high of 1595 levels to
1370 levels during the first quarter & then against it made a high of
1688 levels. The announcement of Rs 65 per quintal hike in the
support price of wheat to Rs 1,350 per quintal, raised the prospects
of higher output. In March, farmers in India began to harvest the
sixth consecutive wheat crop that was expected to exceed demand.
India, the world's second-biggest wheat grower, had produced a
record output of 92.46 million tonnes. On November 1, India's
wheat stocks stood at 34 million tonnes, three times more than the
target for the Oct-Dec quarter. The carryover of centrally held wheat
stocks still grew by 4.2 million tonnes on a year-over-year basis, to
24.2 million tonnes, the highest since 2001/02. However, the record
fall in rupee to 68.80 levels emerged as a positive fundamental
factor for the counter. Wheat futures rebounded, pushed by the
higher exports. As cited by the International Grain Council, during
the 2012/13 (Apr/Mar) marketing year, India's wheat shipments
soared to 6.7 million tonnes. Furthermore, to push more exports
the Government has reduced the floor price for wheat exports by
$40 a tonne to $260. This step was taken to make Indian wheat
shipments more viable in the global market. Indian wheat
competes with grain from the Black Sea region. On the Chicago
Board of Trade, wheat tumbled by 16% in the past year. As
estimated by the United Nations' Food & Agriculture Organization,
the global wheat harvest was seen at a record of 708.5 million
tonnes. According to U.S Dept. of Agriculture, world wheat stocks
were projected at 2.2 million tonnes higher with the biggest
increases for the European Union, Canada and Argentina.
This essential commodity may give a sigh of relief to the consumers
as smooth supply should be able to satisfy the appetite of
consumers without difficulty. Although, seasonality may give
chance to both bulls and bears with limited swings in the prices.
In 2013-14, India is likely to achieve wheat production target of
92.5 million tonnes, as the storage water level in country's 85 major
reservoirs is the highest in the last 10 years. As reported, the water
level in the reservoirs was 78% or 121.389 Billion Cubic Metres
(BCM) of the 154.877 BCM capacity, as on November 27, 2013.
Moreover, acting on the recommendations of the Commission for
Agricultural Costs and Prices, the Government has fixed Minimum
Support Price (MSP) of wheat for the Agricultural Year (July-June)
2013-14 at Rs.1350 per quintal. The farmers of Madhya Pradesh are
encouraged to take up wheat cultivation this year attracted by the
additional bonus the State Government.
Range: Rs. 1450-1900
On the export front, buoyed by better response the state entities such as MMTC (Metals and Minerals Trading Corporation of India), STC (State Trading Corporation) and PEC Ltd (A Premier International Trading Company) have invited bids to ship out 6.5 lakh tonnes. This is to take advantage of current global prices, also lower availability from Russia and Ukraine on account of severe winter. The government has reduced the base price for export from $300 a tonne to $260 a tonne to clear the heft stocks from the warehouses, before the arrival of the new crop. As cited by the USDA (U.S. Department of Agriculture), MY 2013/14 wheat exports are likely to reach 6.0 million metric tonnes. According to Food Corporation of India, wheat stocks in state godowns were estimated at 34 million tonnes as on November 1, against the requirement of 14 million tonnes.
Since inception, looking at the uptrend in Wheat futures on the national bourse, quoting at 1685 levels, near the all time high of 1700 levels is expected to trade with an upside bias. However, during the first three months of the year, the counter may witness some correction as the supplies from the harvest of Rabi crop may exert a downside pressure. Thereafter, till the month of July, it may consolidate taking support above 1450 levels with upside getting capped on account of harvest in major producing countries such as China, U.S & EU-25. By the year end, factors such as lower level buying, seasonal demand during marriage season demand & festivities may add to the upside momentum for 1900 levels.
In 2014, wheat prices internationally may witness a bearish movement, thanks to the strong global supplies. As cited by the International Grain Council, looking ahead to 2014/15, winter wheat planting is nearly complete in the northern hemisphere, and the global wheat harvested area is projected to expand by 1.4%, to about 223 million hectares. The forecast for world wheat production has been pegged at 698 million tonnes, total use is anticipated at 692 million tonnes, world trade is seen at 142 million tonnes and the end-season stocks projection is estimated at 181 million tonnes.
COMMODITY OUTLOOK 2014
Yearly price movement of Wheat futures
Source: Reuters & SMC Research
2006 2007 2009 2010 2011 2012 2013
Open 799.00 1025.00 1135.00 1340.00 1335.00 1236.00 1589.00
High 1145.80 1139.80 1461.00 1460.00 1435.00 1705.00 1688.00
Low 765.00 940.00 1052.20 1112.20 1025.00 1111.00 1370.00
Close 1008.40 1018.60 1343.20 1337.00 1237.00 1592.00 1671.00
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
1400.00
1600.00
1800.00
Rs. /Quintal
Kapas
Annual Commentary
Annual Outlook
During the first half of the year, Kapas futures swung between gains
and losses due to mixed fundamentals. The counter witnessed a
high of 1100 levels, as registration for exporting cotton yarn was
seen at a high of at least two years, owing to the burgeoning demand
from Bangladesh and China. The Cotton Advisory Board scaled up
the export and import estimates for the commodity for cotton year
2012-13 (October-September). However, by the year end, the
commodity headed down towards 920 levels. The Cotton
Corporation of India began selling its stocks built through market
intervention operations as part of the Government efforts to hold
the natural fibre's price line. Adding to the bearish sentiments,
cotton exports dropped by 31% to 9.8 million bales in 2012-13
marketing year, but imports rose slightly to 1.47 million bales in the
same period. China's slow purchase hit the cotton prices globally,
sending the prices to a 10-month low as investors and traders
fretted that China was gearing up to release cotton from its
stockpile. China cut its purchases of domestic cotton for state
reserves in 2013 to 731,050 tonnes, down 41% compared with the
same period last year, according to data from the China Cotton
Information Center. Bearish sentiments took a grip on the counter
and estimates also showed that the India's output would climb to a
record as above-average monsoon rainfall increased planting.
Cotton Advisory Board (CAB) revised India's cotton production
estimate upwards to 34 million bales for 2012-13 from 26.5 million
bales.
The fundamentals of the domestic market as cited by the Cotton
Association of India show that the Indian cotton output for 2013-14
(Oct-Sep) has been estimated at 38.05 million bales. It includes a
carryover stock of cotton on Oct 1 at 4.3 million bales and imports at
1.5 million bales. The cotton yield in India is expected to be only 540
kg per hectare in 2013-14, slightly higher than last year's yield of
517 kg per hectare. In 2013-14, the total demand has been pegged
at 30.0 million bales, which would leave a surplus of 13.8 million
bales next season. On the demand side, much will depend on China's
import policies, movement of rupee as against dollar, competitive
pricing and adequate supplies, which are expected to sustain
interest in Indian cotton among foreign buyers.
As regards China, MY13/14 imports are forecast down significantly
at 2.2 million tonnes as massive state stocks, import constraints and
slowing consumption would influence a slowing down of demand.
In the supply side, the total cotton reserves of China are expected to
grow as the country continues to purchase under its price support
Range: Rs. 850-1100
program. In a related note, a modification of the government cotton
support policy is currently under consideration and may be
announced in 2014. Based on a recent survey by China's National
Cotton Market Monitoring Network, MY13/14 cotton production is
estimated at 6.67 million tonnes, down by 12.30% as compared to
MY12/13. The average yield is forecasted down by 9.30% to 1,415
Kg per hectare due to unfavorable weather impacts.
Regarding the price outlook, cotton prices on the domestic market
during the initial months of the year may remain range bound with
upside getting capped, as the commodity would be amidst the peak
arrival season & limited buying from mills. However, Kapas futures
on NCDEX (Apr) is expected to take support above 850 levels. In the
current scenario, the farmers are holding back their produce in
expectation of getting a better price of about Rs 1,000 a 20 kg.
During the period from March till September, the counter may
witness a downfall by about 6% moving in lock steps with the
seasonality pattern of cotton futures traded on the Intercontinental
Exchange (ICE). The counter may also get pressurized by China's
cotton auction from its stockpile. As cited by the International
Cotton Advisory Committee (ICAC), Beijing will sell about 2-3
million tonnes of cotton from its huge state reserves. Adding to the
bearish fundamental, the world demand & supply situation as
estimated by the International Cotton Advisory Committee, would
witness a record global cotton inventories by the end of the
2013/14 crop year. The world inventories will total 20.3 million
tonnes by July 31 next year, 10% higher than inventories in the
previous season.
By the end of the calendar year, from September till December,
factors such as seasonal demand and lean season of arrivals in the
domestic market may prove beneficial to the investors. The
seasonality pattern shows that during this period Kapas futures get
expensive by about 9%.
COMMODITY OUTLOOK 2014
Yearly price movement of Kapas futures
Source: Reuters & SMC Research
2007 2009 2010 2011 2012 2013
Open 400.00 548.60 666.90 749.50 822.00 985.00
High 429.00 695.80 775.00 1262.00 1184.00 1105.00
Low 398.90 516.00 570.00 630.10 801.00 874.00
Close 421.70 666.10 747.60 817.10 982.00 952.50
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
1400.00
Rs/20Kgs
®
36®
37
Expand your investment portfolio with commodity.
Invest in commodity with us and benefit from award winning industry expertise, simplified
research calls and latest trading platform. From oils and spices to metals and grains, make
commodity the biggest asset in your investment portfolio with our personalised services.
• Longest trading time (open till 23:00 hours)
• PAN India presence
• Offline & online trading facilities
• Arbitrage expertise
• Strong delivery handling team
• Dedicated research team having experienced and skilled research analysts
REGISTERED OFFICE: 11/6B, Shanti Chamber, Pusa Road, New Delhi - 110005 • Tel +91-11-30111000 • Fax +91-11-25754365
MUMBAI: 1st Floor, Dheeraj Sagar, Opp. Goregaon Sports Club, Link Road, Malad (W), Mumbai - 400064 • Tel +91-22-67341600 • Fax +91-22-28805606
KOLKATA: 18, Rabindra Sarani, Poddar Court, Gate No. 4, 5th Floor, Kolkata - 700001 • Tel +91-33-39847000 • Fax +91-33-39847004
DUBAI: 312, Belshalat Building, Al Karama, Dubai, P.O. Box 117210, U.A.E. • Tel +9714-3963120 • Cell +97150-2612483 • Fax +9714-3963122
SMC Global Securities Limited
INDIA'S BEST MARKET ANALYST AWARD - COMMODITIES (VIEWERS' CHOICE)
Source: Zee Business Best Market Analyst Awards, 2012
INDIA'S BEST ANALYST AWARD - COMMODITIES (FUNDAMENTAL)
Source: CPAI-2nd International Commodity Convention, 2012
CALL 1800-11-0909 (TOLL-FREE) TEXT 'SMC COM' TO 56677 VISIT WWW.SMCTRADEONLINE.COM
Disclaimer: Investment in securities & commodities market are subject to market risk • All insurance products sold through SMC Insurance Brokers Pvt. Ltd. • Investment Banking Services provided by SMC Capitals Ltd. • Equity PMS and Wealth management services provided by SMC
Investments & Advisors Ltd. • IPOs and Mutual Funds distribution service is provided by SMC Global Securities Ltd. • Financing Services provided by Moneywise Financial Services Pvt Ltd. • Insurance is the subject matter of solicitation. • Commodity broking services provided by SMC Comtrade
Ltd. • SMC business associate/ partner means Sub Broker/ Authorised Person/ Remiser.
Award sources: BSE IPF and D&B Equity Broking Awards 2012 & 2013 • Bloomberg-UTV Financial Leadership Awards 2012 • Business Sphere Group 2011
NSE INB/INF/INE 230771431, BSE INB/INF 011343937, MCX- SX INB/INF 260771432 INE 260771431, USEL INE 271343936, CDSL IN-DP-CDSL-583-2010, NSDL IN-DP-NSDL-333-2010 (SMC Global Securities Ltd.) NCDEX: NCDEX/TCM/CORP/0131, MCX: MCX/TCM/CORP/0385, NMCE: NMCE/TCM/CORP/0215, ICEX: ICEX/TCM/CORP/009, ACE: ACEL/CM/CORP/0267, PMS INP000003435 (SMC Investments and Advisors Ltd.), IRDA Regi: No: DB 272/04 License No. 289 (SMC Insurance Brokers Pvt. Ltd.), UCX: 210001
Annual Commentary & Outlook: Chana
Chana
Annual Commentary
Annual Outlook
During the past year, a downtrend persisted over chana futures as
the counter witnessed a massive fall of more than 25%. The bearish
fundamental factors such as slack buying support in export as well
as local markets, higher arrivals of other pulses and yields going up
in Madhya Pradesh pressurized added to the downside sentiments.
On the supply side, the output of pulses in 2012-13, was 18.45
million tonnes, the best so far. In the beginning of the second
quarter, lower level buying along with disequilibrium between
demand & supply triggered a price increase in the counter. With a
steady decline in arrival and enthusiastic buying support from
millers, an upside momentum was seen in chana futures with a high
of 4127 levels. Later during the year, profit booking from higher
levels, lower demand from flour mills, cheaper availability from
Australian, Canada, Tanzania & hopes of better sowing sent the
commodity to 2500 levels. Amid report of favourable crop prospect
and with harvesting of new chana crop, a panic button was seen
among the stockists. Moreover, the government extended the ban
on export of pulses by one more year, but allowed outbound
shipments of kabuli chana, organic pulses and lentils with some
riders. However, by the end of the year, chana futures stabilized
near 3000 levels, supported by seasonal and marriage season
demand & by a weaker rupee that gained strength as against dollar,
touching its lowest at 68.80 levels.
Chana futures on NCDEX are hovering near 2940 levels, down by
more than 40% from its life time high of 4999 levels. The counter is
facing a resistance near 3250 levels. The factors such as adequate
carryover stock, arrival of new crops in the global market and
continuous flow of imported chana in the domestic market are
keeping a lid over gains. In the days to come, market participants
would be keeping a close watch over the rupee movement as
against dollar. A depreciating local currency makes imports costlier.
India's annual demand of pulses is about 20.50 million tonnes and
growing. In 2013-14, the demand for pulses is projected at 21.77
million tonnes, an increase of more than 6%. On the contrary,
Government of India has set production target of pulses for the year
Range: Rs. 2400-3800
2013-14 at 19 million tonnes. Hence, the deficit would likely to be
bridged through imports.
As per the first advance estimates of production of Kharif crops
given by Ministry of Agriculture, the production of Kharif Pulses is
pegged at 6.01 million tonnes, higher than the average production
by 0.42 million tonnes mainly due to higher than average
production of tur and urad. In the latest statistics, as the sowing of
Rabi season (March Harvest) enters its last leg, the area sown under
pulses in 2013-14 has been at 114.87 lakh hectares, as compared to
102.49 lakh hectares during same period last year. A good south-
west monsoon & filled reservoirs in the country have pushed the
prospects of a higher output. The present storage is 122% of last
year's storage and 123% of last 10 years average storage during the
same period.
The spot prices at Delhi chana market is quoting near 3000 levels,
the lowest in two years on account of selling pressure from the
stockiest before the new crop hits the market in the month of
February this year. On the national bourse, chana futures are likely
to remain stable taking support above 2400 levels. The forwards
contracts on NCDEX are in a contango, which shows an uptrend &
that the commodity is quoting higher in the months ahead. The
upside may get extended towards 3800 levels, surpassing 3400
levels.
On the international market, the average price is forecast to decline,
for the third consecutive year, due to higher world and Canadian
supply. For 2013-14, production of chickpeas is estimated to rise by
6% to 171 kilo tonnes & supply is estimated to rise by 29% from last
year due to the large carryover stocks.
Yearly price movement of Chana futures
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 1993.00 2445.00 2131.00 2200.00 2475.00 2559.00 3339.00 3855.00
High 3345.00 2648.00 3016.00 2685.00 2590.00 3700.00 4999.00 4127.00
Low 1702.00 1985.00 2111.00 2001.00 2065.00 2198.00 3020.00 2528.00
Close 2460.00 2131.00 2514.00 2474.00 2557.00 3354.00 3852.00 2939.00
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
Rs. /Quintal
®
38
Expand your investment portfolio with commodity.
Invest in commodity with us and benefit from award winning industry expertise, simplified
research calls and latest trading platform. From oils and spices to metals and grains, make
commodity the biggest asset in your investment portfolio with our personalised services.
• Longest trading time (open till 23:00 hours)
• PAN India presence
• Offline & online trading facilities
• Arbitrage expertise
• Strong delivery handling team
• Dedicated research team having experienced and skilled research analysts
REGISTERED OFFICE: 11/6B, Shanti Chamber, Pusa Road, New Delhi - 110005 • Tel +91-11-30111000 • Fax +91-11-25754365
MUMBAI: 1st Floor, Dheeraj Sagar, Opp. Goregaon Sports Club, Link Road, Malad (W), Mumbai - 400064 • Tel +91-22-67341600 • Fax +91-22-28805606
KOLKATA: 18, Rabindra Sarani, Poddar Court, Gate No. 4, 5th Floor, Kolkata - 700001 • Tel +91-33-39847000 • Fax +91-33-39847004
DUBAI: 312, Belshalat Building, Al Karama, Dubai, P.O. Box 117210, U.A.E. • Tel +9714-3963120 • Cell +97150-2612483 • Fax +9714-3963122
SMC Global Securities Limited
INDIA'S BEST MARKET ANALYST AWARD - COMMODITIES (VIEWERS' CHOICE)
Source: Zee Business Best Market Analyst Awards, 2012
INDIA'S BEST ANALYST AWARD - COMMODITIES (FUNDAMENTAL)
Source: CPAI-2nd International Commodity Convention, 2012
CALL 1800-11-0909 (TOLL-FREE) TEXT 'SMC COM' TO 56677 VISIT WWW.SMCTRADEONLINE.COM
Disclaimer: Investment in securities & commodities market are subject to market risk • All insurance products sold through SMC Insurance Brokers Pvt. Ltd. • Investment Banking Services provided by SMC Capitals Ltd. • Equity PMS and Wealth management services provided by SMC
Investments & Advisors Ltd. • IPOs and Mutual Funds distribution service is provided by SMC Global Securities Ltd. • Financing Services provided by Moneywise Financial Services Pvt Ltd. • Insurance is the subject matter of solicitation. • Commodity broking services provided by SMC Comtrade
Ltd. • SMC business associate/ partner means Sub Broker/ Authorised Person/ Remiser.
Award sources: BSE IPF and D&B Equity Broking Awards 2012 & 2013 • Bloomberg-UTV Financial Leadership Awards 2012 • Business Sphere Group 2011
NSE INB/INF/INE 230771431, BSE INB/INF 011343937, MCX- SX INB/INF 260771432 INE 260771431, USEL INE 271343936, CDSL IN-DP-CDSL-583-2010, NSDL IN-DP-NSDL-333-2010 (SMC Global Securities Ltd.) NCDEX: NCDEX/TCM/CORP/0131, MCX: MCX/TCM/CORP/0385, NMCE: NMCE/TCM/CORP/0215, ICEX: ICEX/TCM/CORP/009, ACE: ACEL/CM/CORP/0267, PMS INP000003435 (SMC Investments and Advisors Ltd.), IRDA Regi: No: DB 272/04 License No. 289 (SMC Insurance Brokers Pvt. Ltd.), UCX: 210001
Annual Commentary & Outlook: Chana
Chana
Annual Commentary
Annual Outlook
During the past year, a downtrend persisted over chana futures as
the counter witnessed a massive fall of more than 25%. The bearish
fundamental factors such as slack buying support in export as well
as local markets, higher arrivals of other pulses and yields going up
in Madhya Pradesh pressurized added to the downside sentiments.
On the supply side, the output of pulses in 2012-13, was 18.45
million tonnes, the best so far. In the beginning of the second
quarter, lower level buying along with disequilibrium between
demand & supply triggered a price increase in the counter. With a
steady decline in arrival and enthusiastic buying support from
millers, an upside momentum was seen in chana futures with a high
of 4127 levels. Later during the year, profit booking from higher
levels, lower demand from flour mills, cheaper availability from
Australian, Canada, Tanzania & hopes of better sowing sent the
commodity to 2500 levels. Amid report of favourable crop prospect
and with harvesting of new chana crop, a panic button was seen
among the stockists. Moreover, the government extended the ban
on export of pulses by one more year, but allowed outbound
shipments of kabuli chana, organic pulses and lentils with some
riders. However, by the end of the year, chana futures stabilized
near 3000 levels, supported by seasonal and marriage season
demand & by a weaker rupee that gained strength as against dollar,
touching its lowest at 68.80 levels.
Chana futures on NCDEX are hovering near 2940 levels, down by
more than 40% from its life time high of 4999 levels. The counter is
facing a resistance near 3250 levels. The factors such as adequate
carryover stock, arrival of new crops in the global market and
continuous flow of imported chana in the domestic market are
keeping a lid over gains. In the days to come, market participants
would be keeping a close watch over the rupee movement as
against dollar. A depreciating local currency makes imports costlier.
India's annual demand of pulses is about 20.50 million tonnes and
growing. In 2013-14, the demand for pulses is projected at 21.77
million tonnes, an increase of more than 6%. On the contrary,
Government of India has set production target of pulses for the year
Range: Rs. 2400-3800
2013-14 at 19 million tonnes. Hence, the deficit would likely to be
bridged through imports.
As per the first advance estimates of production of Kharif crops
given by Ministry of Agriculture, the production of Kharif Pulses is
pegged at 6.01 million tonnes, higher than the average production
by 0.42 million tonnes mainly due to higher than average
production of tur and urad. In the latest statistics, as the sowing of
Rabi season (March Harvest) enters its last leg, the area sown under
pulses in 2013-14 has been at 114.87 lakh hectares, as compared to
102.49 lakh hectares during same period last year. A good south-
west monsoon & filled reservoirs in the country have pushed the
prospects of a higher output. The present storage is 122% of last
year's storage and 123% of last 10 years average storage during the
same period.
The spot prices at Delhi chana market is quoting near 3000 levels,
the lowest in two years on account of selling pressure from the
stockiest before the new crop hits the market in the month of
February this year. On the national bourse, chana futures are likely
to remain stable taking support above 2400 levels. The forwards
contracts on NCDEX are in a contango, which shows an uptrend &
that the commodity is quoting higher in the months ahead. The
upside may get extended towards 3800 levels, surpassing 3400
levels.
On the international market, the average price is forecast to decline,
for the third consecutive year, due to higher world and Canadian
supply. For 2013-14, production of chickpeas is estimated to rise by
6% to 171 kilo tonnes & supply is estimated to rise by 29% from last
year due to the large carryover stocks.
Yearly price movement of Chana futures
COMMODITY OUTLOOK 2014
Source: Reuters & SMC Research
2006 2007 2008 2009 2010 2011 2012 2013
Open 1993.00 2445.00 2131.00 2200.00 2475.00 2559.00 3339.00 3855.00
High 3345.00 2648.00 3016.00 2685.00 2590.00 3700.00 4999.00 4127.00
Low 1702.00 1985.00 2111.00 2001.00 2065.00 2198.00 3020.00 2528.00
Close 2460.00 2131.00 2514.00 2474.00 2557.00 3354.00 3852.00 2939.00
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
Rs. /Quintal
®
38
