MCX gets shareholder nod to move FTIL stake into escrow account

In a major relief, the Multi Commodity Exchange has received shareholder approval to transfer promoter Financial Technologies’ stake into an escrow account, and sell it off if the promoter fails to find a suitor for the same.

Commodity market regulator, Forward Markets Commission, declared Financial Technologies (FTIL) not ‘fit and proper’ to hold stake in the commodity exchange, after its subsidiary National Spot Exchange failed to settle trades worth ₹5,600 crore entered on its platform. The Commission directed FTIL to pare its stake to two per cent from 26 per cent.

Stumbling block

The re-negotiation of the technology supply contract FTIL has with MCX seemed to be the stumbling block in stake sale. The contract has a tenure of 33 years with stringent exit clauses, delaying the re-negotiation.

Since there was not much progress in the implementation of its order, FMC banned MCX from launching new contracts till the promoter abides by its order.

Caught between the promoter and the regulator, the board of MCX sought shareholder approval to amend the Articles of Association and transfer the promoter’s stake to the escrow account, and put it on sale to meet the regulators’ diktat.

Of the 267 valid ballots, 13 shareholders voted against the resolution to alter the Memorandum of Association of the company, while 16 investors voted against the second resolution on alteration to Articles of Association of the company. Nearly 27 per cent of the non-FTIL shareholders participated in the voting for two resolutions and both the resolutions were approved by around 95 per cent voting in favour. FTIL was not allowed to participate in the voting process.

The first resolution was to give powers to sell stake of FTIL while the second was an amendment in the Articles of Association.

Shares of MCX were up 0.6 per cent at ₹615.65 on Wednesday.

Bill in Budget session to amend Forward Contract Regulation Act

Amendments to give more teeth to regulator, introduce new products. The Finance Ministry is considering tabling amendments to the Forward Contract Regulation Act, 1952, in the next session of Parliament, slated to be held in the second week of July.

The amendments seek to not just give more power to the commodity market regulator, the Forward Market Commission (FMC), but also pave the way for introduction of new products, such as options, in the market. There is also a move to allow banks and foreign institutional investors (FIIs) to take part in the commodity markets.

However, this will require an amendment in the Banking Regulation Act and the SEBI Act.

The Bill for amendments was tabled during the 15{+t}{+h} Lok Sabha, but could not get passed even after the Standing Committee submitted its report. The Bill lapsed with the dissolution of the House.

With the new Government, led by Narendra Modi, already kicking off the process to introduce the Bill in Parliament, it is clear that at least for the time being FMC will not be merged with SEBI.

Last week, Finance Secretary Arvind Mayaram had said, “We are hopeful that very soon we should have a new statute in place which will provide greater regulatory authority to FMC.”

An autonomous independent regulator is absolutely critical to providing strength and depth to the commodities market, he added.

The new Bill is also likely to include suggestions given by the DS Kolamkar Committee, mainly on facilitating frictionless arbitrage between the spot and futures market, which is key to fulfilling the objectives of price discovery and hedging.

The committee was set up in wake of the ₹5,600 crore NSEL scam, following which the commodity market and FMC were transferred to the Finance Ministry from the Consumer Affairs Ministry in September 2013.

The committee focussed on reduction of trading costs and suggested that one way to reduce the capital cost for a commodities trader was to make banks and other financial institutions an integral part of trading. It also suggested that foreign financial firms (intermediaries and end-users) should be permitted to participate in commodity futures trading.

The existing system of limits on open interest and risk management provides adequate safeguards against the risk of allowing foreign participation in Indian markets, it said.

The committee also recommended that the Government exempt arbitrageurs from restrictions on holding inventory under the Essential Commodities Act, 1955.

To assist the development of organisational capability of firms operating in the commodity futures ecosystem, the Government should stop the suspension of trading in an abrupt and unreasoned manner, it suggested.

The Latest From Iraq - The Complete Troop Movements

 The Institute for the Study of War notes, the violent clashes continue from north to south in Iraq.

Source: ISWIraq

Blockade at Vale’s Onça Puma nickel project in Brazil ends

A blockade at Vale’s Onça Puma nickel project in Brazil has ended after the indigenous people who had occupied the area demanding better compensation left the plant, the miner said on Monday June 16.

Nearly 350 indigenous people of Xikrin do Cateté had blockaded the entrance of the plant in the Brazilian state of Pará on Monday, after having occupied the area the previous week from Thursday morning until Saturday evening. "Workers exit was not blocked. Only nickel production was paralysed," federal prosecutors from Pará state said.

Shanghai copper backwardation swells in squeezed market

The backwardation on the Shanghai Futures Exchange (SHFE) expanded sharply on Monday June 16, as some holders of short positions were squeezed ahead of the exchange’s June prompt date.

The outright price on the June copper contract, with delivery date of Monday, surged by some 1,590 yuan per tonne, or about 3.25%, in just the final half an hour of trading. The contract closed at 50,450 yuan per tonne, some 2,710 yuan per tonne higher than the September contract. "The large backwardation and the increase in the June contract are due to long investors squeezing the market," the head of futures at one big smelter said.

Month	Options	Charts	Last	Change	Prior Settle	Open	High	Low	Volume	Hi / Low Limit	Updated
Legend: Options Price Chart About This Report
JUN 2014	JUN 2014	Show Price Chart	3.0600	+0.0130	3.0470	3.0620	3.0620	3.0575	20	No Limit	01:08:09 CT 17 Jun 2014
JUL 2014	JUL 2014	Show Price Chart	3.0605	+0.0105	3.0500	3.0480	3.0645	3.0445	5,479	No Limit	01:08:25 CT 17 Jun 2014
AUG 2014	AUG 2014	Show Price Chart	3.0530 b	+0.0060	3.0470	3.0445	3.0600	3.0440	15	No Limit	01:08:09 CT 17 Jun 2014
SEP 2014	SEP 2014	Show Price Chart	3.0535	+0.0095	3.0440	3.0440	3.0585	3.0375	1,389	No Limit	01:08:09 CT 17 Jun 2014
OCT 2014	OCT 2014	Show Price Chart	3.0435	-0.0015	3.0450	3.0435	3.0435	3.0435	1	No Limit	01:08:09 CT 17 Jun 2014
NOV 2014	NOV 2014	Show Price Chart	3.0525	+0.0085	3.0440	3.0420	3.0525	3.0420	6	No Limit	01:08:09 CT 17 Jun 2014
DEC 2014	DEC 2014	Show Price Chart	3.0500	+0.0075	3.0425	3.0400	3.0540	3.0400	136	No Limit	01:08:09 CT 17 Jun 2014

2013 Top 10 Copper-producing Countries

In terms of copper production, it’s Chile that accounts for the lion’s share of world output. However, there are still several other countries with significant operations, including neighboring Peru, as well as China, the United States and Russia. 

 

The US Geological Survey has released its most recent set of data on copper-producing countries, and Copper Investing News took a look to see which made the top 10. Below is a list of those countries, along with a little background information on each nation.

 

1. Chile

Mine production: 5,700,000 tons

 

Up first is Chile, which produced a whopping 5,700,000 tons of copper in 2013. That’s up from 5,430,000 tons in 2012. As The Economist reports, the red metal provides 20 percent of the country’s gross domestic product and accounts for 60 percent of its exports. The publication also notes that thanks to copper, Chile’s economy is expanding by 6 percent annually; it also credits the industry with the country’s low rates of inflation and unemployment.

 

2. China

Mine production: 1,650,000 tons

 

China is the closest second, producing less than half of what was put out by Chile. It recorded 1,650,000 tons of copper production in 2013, an increase from the 1,630,000 tons produced in 2012. China, the world’s largest single consumer of copper, hit record rates of production for the red metal in November 2013, according to Reuters. New production sites continued to come online through 2013 in China, increasing production at a steady rate. Additionally, importing raw copper concentrate to China is costly, causing domestic smelting operations to begin to rise.

 

3. Peru

Mine production: 1,300,000 tons

 

Peru produced 1,300,000 tons of copper in 2013, not moving much from 2012 production level. Peru This Week reported that the country’s mining production could rise by as much as 10 percent in 2014, and Peru’s energy and mines minister, Jorge Merino, has projected a 17-percent increase in copper production alone as the result of several new projects set to open in the year ahead. The country also expects more foreign investment into its mining sector as a result of these projects.

 

4. United States

Mine production: 1,220,000 tons

 

The US saw 1,220,000 tons of copper production for 2013, up slightly from its figure of 1,170,000 tons in 2012. MINING.com notes that this increase came despite a catastrophic landslide at Utah’s Bingham Canyon mine in early 2013; the incident caused it to cease production for an extended period of time. The total copper production in the US is worth more than $1 billion.

 

5. Australia

Mine production: 990,000 tons

 

In 2013, 990,000 tons of copper were produced in Australia, marking an increase from 958,000 tons in 2012. Geoscience Australia, a government agency, notes that most of the copper resources in the country are located in Queensland and South Australia, though there are resources in each state and in the Northern Territory as well. Most of the country’s production is centered in the Mount Isa region in Queensland and the Olympic Dam mine in South Australia.

 

6. Russia

Mine production: 930,000 tons

 

Russia ranks sixth, having produced 930,000 tons of copper in 2013. That level is up from 883,000 tons it produced in 2012. NASDAQ reports that Russia has about 10 percent of the world’s copper reserves, and that these deposits are located primarily in Siberia and the Urals. The vast majority of Russian copper projects are in remote regions, away from population and infrastructure, which makes mining operations relatively difficult. Additionally, the country has laws restricting the amount of foreign investment in its mineral reserves.

 

7. The Democratic Republic of the Congo

Mine production: 900,000 tons 

 

The Democratic Republic of the Congo produced 900,000 tons of copper in 2013, a significant rise from the 600,000 tons produced in the country in 2012. The International Monetary Fund believes this level of production may spur the country’s economic growth to the tune of 8.7 percent in 2014, according to Bloomberg. In 2012, the mining industry comprised more than 15 percent of the Congo’s gross domestic product, the news outlet notes.

 

8. Zambia

Mine production: 830,000 tons

 

In Zambia, 830,000 tons of copper were produced in 2013, marking an increase from 2012′s 690,000 tons. 2013 saw several new copper projects begin in Zambia, boosting production by 21 percent in the first 11 months of the year, according to The Wall Street Journal.

 

“We are at a level where most copper projects that have been in the pipeline a few years back are coming on stream,” Fredrick Bantubonse, an independent metal analyst based in Zambia, told the Journal.

 

9. Canada

Mine production: 630,000 tons

 

Canada just made it into the top 10 with 630,000 tons of copper production in 2013, up from 579,000 in 2012. Natural Resources Canada notes that copper volume and value both increased despite decreases in the metal’s price throughout the year. The organization attributes this rise to new mine openings by Glencore Xstrata (LSE:GLEN) and Hudbay Minerals (TSX:HBM) that took place in 2013.

 

10. Mexico

Mine production: 480,000 tons

 

Coming in at number 10 is Mexico, which produced 480,000 tons of copper in 2013 to clock an increase from the 440,000 tons it produced in 2012. Like other countries on the list, Mexico forecasts increases in copper production over the next two years, as per Bloomberg. However, the publication notes that copper prices will need to remain steady in order for that to occur.

Commodity Transaction Tax to be diluted in Budget

The Commodities Transaction Tax is likely to be revamped in the coming budget.

Under the new system, compulsory delivery-based contract may be exempted from the tax, which means only speculative trade will attract the levy.

This tax was imposed on July 1, 2013 on the line of securities transaction tax.

It is levied at the rate of 0.01 per cent on all non-agricultural products such as gold and silver and even on processed agricultural processed products such as sugar. At this rate, tax for trade worth ₹1 lakh would be ₹10.

Volume dips

Data from the Forward Market Commission reveal that cumulative value of trade during April-May this fiscal dropped to ₹9.53 lakh crore from ₹28.16 lakh crore in the same period a year ago, a dip of 66 per cent.

“Volume has come down which is affecting fair price discovery,” SC Agarwal of SMC Securities, a Delhi-based equity and commodity trading firm, said. Traders also alleged that this tax made exchanges 350 per cent more expensive.

At the same time, non-agricultural commodity consist of over 80 per cent in total trading, which is why trade has been affected.

Though, participants want the tax to be removed completely, there are no such indications as of now.

Many market players raised the demand for doing away with the transaction tax completely before the Finance and Economic Affairs Secretary Arvind Mayaram during a conference organised by Commodity Participants Associations of India on Saturday.

Regulator’s wish list

Meanwhile, the FMC has pressed for lowering the transaction cost.

This was conveyed during Finance Minister Arun Jaitley’s meeting with all the regulators of financial sector in Mumbai few days ago.