November 25, 2009

Top Stories: Commodities

Top Stories: Commodities
2009-11-25 08:06:34.415 GMT

Nov. 25 (Bloomberg) -- The following are the day's top stories on commodities:
Gold Rallies to Record in Asia as Weakening Dollar Increases Investment
Gold climbed to a record from New York to Shanghai as the dollar extended its decline and the Financial Chronicle newspaper reported India may buy more bullion for its central bank reserves. Gold has rallied 11 percent since India bought 200 metric tons of gold from the International Monetary Fund on Nov. 3. The metal reached an all-time high of $1,180.20 an ounce today following the newspaper report that said the world's largest consumer was open to buying more gold from the IMF. The Reserve Bank of India Governor Duvvuri Subbarao declined to comment. ``The actions from the central banks are a very important factor at the moment,'' said Eugen Weinberg, analyst at Commerzbank AG. ``The purchase from India was like a seal of the prices above $1,000 an ounce. Also, other central banks are buying gold.'' Gold for immediate delivery traded 0.8 percent higher at $1,179.20 an ounce at 3:13 p.m. in Singapore.
February-delivery gold reached a record $1,181.60 an ounce on the New York Mercantile Exchange's Comex division and last traded at $1,180.40. Futures in Mumbai and Shanghai also jumped to their highest prices ever.
Sugar May Climb 36% on India Production Shortfall, Bajaj Hindusthan Says
Sugar may jump 36 percent to a 29- year high after a drought damaged crops in India, forcing the nation to import for a third year, according to Bajaj Hindusthan Ltd., the country's top producer. Prices may advance to 30 cents a pound after March as the country doubles imports to as much as 7 million metric tons in the year ending Sept. 30, said Joint Managing Director Kushagra Nayan Bajaj. Bajaj correctly predicted in July that sugar will reach 25 cents. Sugar has almost doubled in the past year to the highest level since 1981 as rains delayed the harvest in Brazil, while a drought and a shift to other crops made India the biggest buyer. Global stockpiles likely plunged 92 percent to 1.1 million tons at the end of the 2008-2009 season, according to F.O. Licht. ``If we are going to double our imports, you can have a wild guess what's going to happen,'' Bajaj said yesterday in an interview in Mumbai. There's a ``consensus on the fact that it will definitely reach 30 cents,'' he said.
Indonesian Palm Oil Exporters Threatened by Rupiah at 9,000, Groups Say
Indonesia's coal and palm oil exporters' profit margins may narrow should the rupiah rise 5 percent to 9,000 per dollar and costs of fuel and rice keep climbing, industry groups said.
Seven of 16 analysts in a Bloomberg News survey predict a gain in the currency, Asia's best performer this year, to 9,000 or stronger against the dollar by the end of 2010. The median estimate is 9,150, compared with 9,413 today. Indonesia is the world's biggest producer of palm oil and the largest exporter of power-station coal. The currency rising to 9,000 ``is a critical level,'' Bob Kamandanu, chairman of the Indonesian Coal Mining Association, said in an interview in Jakarta on Nov. 20. ``It's too strong.'' Indonesia's exports, which account for 24 percent of gross domestic product, fell 19.9 percent in September from a year earlier after dropping 15.4 percent the previous month, statistics bureau data showed on Nov. 2. The rupiah has risen 16 percent this year, nearly double the pace of the South Korean won. It reached 9,280 on Oct. 15, the strongest level since September 2008, and last traded at 9,000 in July 2007.
China Leads Record Low-Grade Iron Ore Project Spending to Counter BHP, Rio
Citic Pacific Ltd., an arm of China's biggest state-owned investment company, is leading record spending on low-grade iron ore mines in Australia to profit from surging demand as well as to diversify supply. As much as A$18 billion ($16.6
billion) is being spent on so-called magnetite iron ore projects, 36 percent more than a year ago, according to data from the Australian Bureau of Agricultural and Resource Economics. Citic Pacific this month said it signed sales accords for its $4 billion project. China is pumping cash into developing the mines as its steel mills are forecast by Rio Tinto Group to consume more iron ore during the next five years than Australia has shipped throughout history. Bankrolling rival suppliers will help counter the market dominance of Rio and BHP Billiton Ltd. who are forming a production joint venture in Australia. ``If this BHP-Rio joint venture goes ahead, the Chinese will feel even more under threat,'' said Peter Chilton, who holds BHP and Rio shares at Constellation Capital Management Ltd. in Sydney. ``There are a lot of small projects on the go. If China takes more direct control of these and promotes them with an Australian partner or on their own, at least it guarantees them extra supply.''
Japan Buys Least Milling Wheat in Two Weeks in Tender, From U.S., Canada
Japan, Asia's biggest wheat importer, bought 106,000 metric tons of milling wheat at a regular tender today, the Ministry of Agriculture, Forestry and Fisheries said. It was the smallest purchase since Nov. 13, when Japan bought 97,000 tons, according to the ministry. Shipment for 85,000 tons of U.S.
wheat is set between Dec. 21 and Jan. 20, while that for 21,000 tons of Canadian wheat is scheduled for January, the ministry said. Japan has so far bought 2.82 million tons of milling wheat through regular tenders this fiscal year, compared with
3.91 million tons in the previous year ended March 31. Details for this week's tender are listed below:
Locusts Devouring Wheat Crop Prompts Argentina to Send In Air Force Attack
Argentina will deploy two air force planes to contain a potential locust plague and said rains may help control the insect in the country's largest wheat province. ``We have decided not only to give money for local governments to fumigate but will also send two air force planes to spray crops,'' Argentine Agricultural Minister Julian Dominguez said.
``It's raining and some climate conditions have changed, which will also help us control the situation.'' The government last week promised farmers 15 million pesos ($3.95 million) for fumigation, with the money expected to be sent to city governments this week. Farmers need about 50 million pesos to eradicate the insect, said Diego Raimundi, an agronomist at the Regional Agricultural Experimentation Consortium in Coronel Pringles, Buenos Aires province. Argentina, the world's fourth-largest exporter of wheat in 2008, is set to slip down the rankings to eighth in the year through June 2010 after the worst drought in a century harmed crops, according to U.S.
Department of Agriculture data.
Nippon Mining Seeks Higher 2010 Copper Processing Fees After Yen Advances
Nippon Mining & Metals Co., Japan's top copper smelter, wants to charge mining companies higher 2010 processing fees compared with mid-year levels after the yen's gain and lower byproduct prices cut revenue. ``Given the tough business environment for smelters, we want higher treatment and refining charges for 2010,'' Masanori Okada, president and chief executive officer of Nippon Mining & Metals, said today in an interview in Tokyo, without specifying a level. The company is a unit of Nippon Mining Holdings Inc., which owns 66 percent of Pan Pacific Copper Co. Japanese smelters have met with Freeport-McMoRan Copper & Gold Inc. and BHP Billiton Ltd., the world's largest mining company, in the past two weeks and outlined the effect of lower byproduct prices, such as sulfuric acid, a slowing economy and the yen's strength, Okada said. The two sides earlier this year agreed to a 33 percent fee cut for contracts started in July. ``We are hearing that one mining company has indicated the 2010 fees at $45 a ton and 4.5 cent a pound'' while smelters have wanted around $60 and 6 cents, Okada said. Fees were set at $50 a metric ton and 5 cents a pound mid-year, down from $75 a ton and 7.5 cents a pound for contracts started January.
Chinese Pipe Duties Revised Down to 13.2% by U.S. as Case Heads to Agency
The U.S. Commerce Department cut the average duties on $2.7 billion of Chinese pipe imports to 13.2 percent from the 21.3 percent set in September, a measure taken after both countries last week agreed to ease trade tensions. The decision, on imports of steel pipe used in oil wells, is the final ruling by the Commerce Department, and sends the case to the U.S.
International Trade Commission. China will probably seek mediation through the World Trade Organization, Wu Xinchun, the deputy secretary general of the China Iron & Steel Association, said today. Tariffs have been a point of tension between the two nations since President Barack Obama in September imposed duties on tire imports from China. Obama, during a visit to Beijing Nov. 17, pledged along with President Hu Jintao to work on easing trade frictions. ``No matter what the final duty is, we think the character of this action is pure trade protectionism,'' Wu said by telephone in Beijing. ``The duty, if applied, will seriously hurt Chinese exports of steel pipe next year, and even worse, it sets a bad example and may trigger other nations to follow suit.''
Soybeans Extend Rally on Chinse Demand for Oilseeds; Corn, Wheat Advance
Soybeans rose for the fourth time in five days after reports showed stronger demand from China, the world's biggest oilseed importer. Corn and wheat also gained. Chinese imports in December may exceed 4 million metric tons (147 million bushels), with shipments in November expected to be about 3 million tons, the China National Grain & Oils Information Center said yesterday. Argentine farmers, already suffering after the worst drought in a century, are raising funds to fight an imminent locust plague in the nation's biggest wheat-growing region. ``Chinese demand remains firm and there are not many choices to replace U.S. supplies at the moment,''
said Han Sung Min, a manager at the international marketing division of Korea Exchange Bank Futures Co. in Seoul.
``Soybeans may continue to be strong through early next year, lifting corn and wheat.'' Soybeans for January delivery rose
3.5 cents, or 0.3 percent, to $10.495 a bushel in electronic trading on the Chicago Board of Trade at 12:55 p.m. Singapore time. The most- active contract reached $10.6675 this week, the highest level since June 15. Prices have jumped 13 percent since the end of September, as China increased purchases of soybeans from the U.S., the world's biggest grower and exporter.
Rio Tinto, Still a Target, Set to Better BHP on Talk of Bid: Chart of Day
Rio Tinto Group shares, up 116 percent in the year since BHP Billiton Ltd. abandoned a hostile takeover bid, are a better bet than those of its larger rival because rising iron ore prices may trigger another offer, according to UBS AG. The CHART OF THE DAY shows shares of the world's largest and third-biggest mining companies in the past year since Melbourne-based BHP dropped its bid for Rio on Nov. 25, 2008.
Glyn Lawcock, a commodities analyst at UBS, said Rio shares may rise to A$82 as its earnings benefit twice as much from gains in iron ore prices than BHP. Rio closed at A$71.70 in Sydney. A new bid ``is part of the reason why Rio is again outperforming BHP,'' Sydney-based Lawcock said in an interview. The chance of BHP renewing its bid is about 20 percent, said Lawcock, the top-rated analyst on Rio's Australia-traded shares the past year, according to data compiled by Bloomberg. Citigroup Inc.
said this month that BHP buying Rio is the growth option that makes the ``most sense.'' Rio has cut net debt by 42 percent in the past nine months by selling $21 billion in shares, meaning BHP's original offer of 3.4 BHP shares for every one of Rio's now equates to about 1.6 BHP shares, Lawcock said. BHP had cited Rio's debt and a plunge in metal prices for dropping its
$66 billion hostile bid. BHP and Rio both produce coal, copper and aluminum.
Japan's Trading Houses Rethink Share Holdings in Partners, Marubeni Says
Japanese trading houses are reconsidering their shareholdings in customer companies as a plunge in stock prices has eroded earnings, according to Nobuo Katsumata, chairman of Marubeni Corp. ``Trading companies are reexamining if they need to take equity stakes in partner companies as such investments have had large effects on their earnings due to writedowns,''
Katsumata said today at a Japan Foreign Trade Council press conference. He didn't elaborate on whether Marubeni would sell its stakes in companies including Mizuho Financial Group Inc., Inpex Corp. and Yamazaki Baking Co. Mitsui & Co., Japan's second-largest trading company, said yesterday it sold all its
11.7 million shares of Japan Airlines Corp. between April and September as the carrier lurched toward bankruptcy. Mitsui's net income slid 57 percent last year, partially due to writedowns on shares. Mitsubishi Corp., the nation's biggest trading company, has holdings worth more than $11 billion in publicly traded companies. Marubeni took a 38.4 billion yen
($435 million) writedown on securities holdings in the year ending March 31. Shares of Mizuho, Japan's second-largest publicly traded bank, plunged 49 percent in that period. Inpex, the nation's largest oil explorer, fell 39 percent. Marubeni has stakes worth more than $80 million in both companies.
China to Double Environmental Protection Budget to $454 Billion to 2015
China, the world's largest emitter of greenhouse gases, plans to more than double its spending on environmental protection in the five years through 2015, the Shanghai Securities News reported. The Asian nation may invest 3.1 trillion yuan ($454 billion) during the period, compared with
1.4 trillion yuan allocated for the five years between 2006 and 2010, the Chinese-language newspaper said today, citing an unidentified official from the Ministry of Environmental Protection. China, pressed by the U.S. to set emission targets for the Copenhagen global-warming summit next month, said in September it will lower emissions per unit of economic growth through 2020. Greenhouse gases increased to record concentrations last year, the United Nations said yesterday.
``The doubling of the budget is beyond our expectations,'' Yan Biao, an analyst with Century Securities Co. said by phone from the southern city of Shenzhen. ``The increase in spending will benefit equipment manufacturers in water treatment, air pollution control, and also developers in the renewable energy sector.''
Rubber Declines as Weak U.S. Growth Data Spurs Concern About Tire Demand
Rubber declined for a second time in three days after data showed the U.S. economy expanded less than initially estimated last quarter, raising concern that demand for the commodity used in tires may be slow to recover. Futures in Tokyo dropped as much as 0.9 percent after reaching the highest level since Oct. 2, 2008 yesterday on supply concerns. U.S. gross domestic product grew at a 2.8 percent annual pace, compared with its prior estimate of 3.5 percent, the Commerce Department said yesterday. ``The data added to concern that a slow economic recovery may curb raw material demand,'' Kazuhiko Saito, chief analyst at commodity broker Fujitomi Co. in Tokyo, said today by phone. Rubber for April delivery fell as much as 2.2 yen to
245.3 yen a kilogram ($2,780 a metric ton) on the Tokyo Commodity Exchange before trading at 246.9 yen at 11:01 a.m.
local time. May-delivery rubber, which was listed on the exchange today, traded at 248.6 yen after opening at 248.5 yen.

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