Rakesh Jhunjhunwala buys 2% stake in MCX; FTIL cuts stake to 24%

Billionaire investor Rakesh Jhunjhunwala has bought a 1.96% stake in India's largest and only listed commodity bourse Multi Commodity Exchange of India (MCX) from its promoter Financial Technologies(FTIL) in a block deal for Rs 66 crore.

The deal values the exchange at around Rs 3,370 crore. After Tuesday's transaction on the NSE - involving 10 lakh shares having been transferred to Jhunjhunwala at Rs 664 apiece - FTIL's stake in the bourse has declined to 24%.

Jhunjhunwala, said market analysts, made a good buy by having added a company that was the leader in the commodity futures market comprising five national level and 15 regional bourses. The 'Big Bull's' purchase energised the MCX share, which rose 4.2% to hit a year's closing high of Rs 679.7 on Tuesday.

Some 13.03 lakh shares changed hands against the 2-week average of 4.06 lakh shares. MCX enjoys over 80% market share among commodity futures exchanges, which posted a combined turnover of Rs 101.4 lakh crore in FY14. Jhunjhunwala owns stakes in over 40 listed companies such as Crisil, Lupin, Titan Industries, Escorts, DB Realty, VIP Industries, Rallis Indiaand Viceroy Hotels.

The total market value of his portfolio was around Rs 6,700 crore on Tuesday, ETIG database shows. His purchase of a stake in MCX comes at a time when its founder and promoter FTIL has been declared unfit to hold shares in the bourse because of its alleged role in a Rs 5,600-crore scam at its subsidiary National Spot Exchange Ltd (NSEL). FTIL has challenged the regulatory order having declared it not fit and proper in the Bombay High Court.

Months ago, it began a divestment process of 24% of 26% of its stake in MCX without prejudice to its legal rights. The Kotak Group, Reliance Capital and BSE, among others, put in non-binding bids for buying FTIL's stake, but no final offer was reportedly made.

Amid myriad changes post the scam last July, MCX received shareholder approval to amend its articles of association that give it the power to transfer an unfit shareholder's stake into an escrow account and sell the same on its behalf if such a stakeholder fails to reduce its equity. 

Alcoa sees bigger aluminum deficit on China cutbacks

Alcoa Inc has increased its estimate for the global aluminum market deficit this year due to capacity cuts in China, the world's No. 1 producer, a senior executive said on Tuesday in a conference call to discuss second-quarter earnings.

The U.S. aluminum producer expects demand to outpace supply by 930,000 tonnes this year, up from its previous estimate of 730,000 tonnes, William Oplinger, Executive Vice President and Chief Financial Officer, said.

The forecast would not include the more than 5 million tonnes stored in London Metal Exchange-registered warehouses and a similar tonnage of off-market inventory estimated to be held outside of the LME network.

Those stockpiles have cast a long shadow over the global primary aluminum market, pressuring exchange prices to levels close to or below breakeven for many big smelters in recent years.

Oversupply in alumina, a key raw material for making aluminum, will fall to an estimated 800,000 tonnes from 2.2 million tonnes expected previously due to lower output from India and higher imports from China, he said.

Indonesia and Freeport sign a MoU over copper exports

Talks to resolve the mineral export tax disputes ended in a MoU between Indonesia and US miner Freeport-McMoRan Copper & Gold.

As soon as, the shares in the company increased to a new 52-week high and during Monday the share was trading at US$38.74 in New York. The agreement is taken as the major step in the Arizona based firm quest for restarting the copper exports from the country. Relating the exports, Indonesia has imposed new regulations on Jan 12 and introduced a progressive tax on concentrates.

Chairul Tanjung, Indonesia’s chief economic minister told that they were happy and expected that it would be finalized with a MoU. The draft MoU steel requires the approval of both the cabinet and outgoing President Susilo Bambang Yudhoyono. Not only Freeport, but its fellow miner Newmont Mining was also battled against the new export rules.

Last week, Newmont’s Indonesian unit filed for international arbitration as it failed to resolve the disputes. Due to the disputes, the company already declared force majeure last month at its Batu Hijau copper mine

Both Newmont and Freeport have previously disputed they should be excluded from the tax, which starts at 25% and will increase to 60% in the second half of 2016. Freeport and Newmont contributes 97 pct of Indonesia’s copper output 

Zinc Prices Rises to 35-Month High as Inventories Shrink.

Zinc prices rose to a 35-month high as inventories dwindled amid speculation that increasing auto sales in China and the U.S. will boost metal use.

Zinc stockpiles monitored by the London Metal Exchange have dropped 29 percent this year to the lowest since December 2010. Auto sales in China climbed 14 percent in June, an industry group said yesterday. In the U.S., new-vehicle demand surged in May and June, Bloomberg Industries said.

“Demand, particularly in the U.S., probably picked up,” Patricia Mohr, a commodity market specialist at Scotiabank Group in Toronto, said in a telephone interview. “We’re seeing a bit of a recovery in industrial production in the U.S., largely linked to strong auto production. It’s probably reasonably good in China as well.”

Zinc for delivery in three months gained 0.8 percent to settle at $2,282 a metric ton at 5:50 p.m. on the LME. Earlier, the price reached $2,318.50, the highest since Aug. 5, 2011.

The International Zinc Association says the metal is used to coat medium-gauge steel sheet used in auto-body panels. The price has gained 21 percent in the past 12 months.

Zinc, copper and lead markets already face supply deficits while nickel and aluminum are heading for shortfalls, Morgan Stanley said in a report dated today. Zinc is poised for “continued outperformance as the deficit intensifies and global auto sector strength drives demand,” the bank said.

Copper rose 0.1 percent to $7,130 a metric ton ($3.23 a pound) in London. Earlier, the price reached $7,212, the highest since Feb. 19.

The discount for a grade of scrap containing 99 percent of copper narrowed to as low as 4 cents a pound, the smallest in two years, from 8 cents in April as demand increased, Bryan Rosenstrauch, the president of Comm Trade USA Inc., a brokerage in Houston, said yesterday.

On the Comex in New York, copper futures for September delivery fell 0.1 percent to $3.257 a pound. The price climbed 5.1 percent in the past 12 months.

Nickel, lead and aluminum gained in London. Tin dropped.

Railway Budget 2014-15: Highlights

Union Railway Minister D.V. Sadananda Gowda presented his maiden Railway Budget in Parliament on Tuesday. Here are the highlights of this Budget.

* No new increase in passenger fares and freight charges

* Bullet train in Mumbai-Ahmedabad sector

* Diamond quadrilateral for high speed trains

* Plan to hike speed of trains to 160-200 km/hr in 9 sectors

* Online booking to support 7,200 tickets per minute; to allow 1.2 lakh users log in simultaneously

* Reservation system to be revamped, ticket-booking through mobile phones, post offices to be popularised

* Online platform for unreserved tickets

* Combo parking-platform tickets at stations

* Women RPF Constables to escort ladies coaches; 4,000 women constables to be inducted

* Retiring room facility to be extended to all stations

* Battery operated cars for differently-abled and senior citizens at major stations

* Feedback services through IVRS on quality of food

* Food can be ordered through SMS, phone; Food courts at major stations

* Cleanliness budget up by 40 per cent over last year

* CCTVs to be used at stations for monitoring cleanliness

* Setting up of corpus fund for stations’ upkeep; RO drinking water in some stations and trains

* Automatic door closing in mainline and sub-urban coaches

* 58 new trains and extension of 11; 864 additional EMUs to be introduced in Mumbai over 2 years

* FDI in railway projects, except in operations

* FDI, domestic investments in rail infrastructure

* Office-on-Wheels: Internet & workstation facilities on select trains

* WiFi in A1, A category stations and in select trains

* Railways university for technical and non-technical subjects

* Some stations to be developed to international standards through PPP model

* Parcel traffic to be segregated to separate terminals to make passenger traffic unhindered

* Loss per passenger per kilometre up from 10 per cent in 2000-01 to 23 per cent in 2012-13

* Solar energy to be tapped at major stations

* Highest ever plan outlay of Rs. 65,455 crore for 2014-15

* Expenditure in 2014-15 pegged at Rs. 149,176 crore.

Peru's Gold, Copper, Zinc output decline during May; Silver up 7.5% y/y

Peru gold, copper zinc and tin production declined sharply year-on-year during May this year while its Silver output advanced by nearly 7.5% from a year earlier, as per latest government data.

Gold and Silver Production
Gold production declined sharply by 24.6% to 10,629 kg from 14,091 kg a year ago on falling production at mines operated by Newmont (-40%) and Barrick (-31%). Production has also fallen due to a government crackdown on illegal gold miners in the Amazon jungle.

Silver production advanced sharply by 7.4% year-on-year to 332,629 kg as Buenaventura (+24%) increased production.

Minerals account for about 60% of Peru's total exports. Peru is also the world's second-biggest silver producer and fifth biggest producer of gold.

Copper, Zinc ad Tin Production
Nation's copper production dipped by 2.1% to 106,946 mt from 109,278 mt a year earlier as declines at Antamina (-27%) and Freeport's Cerro Verde mine (-11.2%) offset gains at Glencore's Antapaccay operation (+17%) and Southern Copper (+12.4%).

Zinc production fell 6.6% to 112,528 mt due to a drop in output at Antamina and mine closures by Buenaventura and San Ignacio de Morococha, while lead gained 3.1% to 23,575 mt on gains at Votorantim Metais unit Milpo and the startup of Trevali Mining's Santander mine, according to the ministry.

Minsur, the country's only tin producer, increased production 4% to 1,892 mt, while molybdenum rose 0.8% to 1,208 mt as Southern Copper increased output. Cadmium production at Votorantim Metais' Cajamarquilla refinery gained 16.3% to 67 mt and tungsten rose 64% to 7 mt.

Morgan Stanley Raises Nickel Forecast by 13% in 2014

Morgan Stanley raised its nickel price forecast by 13 percent for this year and 6 percent for 2015, anticipating a supply squeeze caused by Indonesia’s ban on ore exports.

The metal will average at $17,640 a metric ton this year and $19,346 next year, analysts including Joel Crane wrote in a report today.

Nickel has jumped 39 percent in 2014, the most among six main metals traded on the London Metal Exchange, after Indonesia barred ore exports of unprocessed ores in January. China is the biggest consumer of the metal, with Indonesia its most important supplier of ore to make nickel pig iron, a cheaper alternative to refined metal for making stainless steel.

“Prices caught a second wind in the second quarter after production at two key projects in New Caledonia, Glencore Xstrata Plc’s Koniambo and Vale SA’s VNC, failed to meet expectations, likely accelerating the impending supply-demand imbalance,” the analysts wrote.

Global supply will exceed demand by 44,200 tons in 2014 before shifting to a deficit of 97,100 tons in 2015, the first annual shortfall since 2010, the bank said. Nickel for delivery in three months on the LME fell 0.4 percent to $19,250 a ton at 10:38 a.m. in Tokyo.

Nickel ore and concentrate imports into China have slumped 36 percent this year, the bank said. China’s nickel pig iron output will drop to 388,000 tons in 2014 and to 212,000 tons in 2015 from 472,000 tons in 2013, it said. Indonesia’s pig iron production will rise from 1,000 tons this year to 46,000 tons in 2015 and about 150,000 tons in 2017, the analysts wrote.

U.S., Europe

Stainless steel orders in the U.S. remain strong, with some mills booking as far out as November to December, the bank said, citing Wood Mackenzie Ltd. In Europe, consumption of stainless products is strong because of a substantial pick-up in demand from the construction and auto industries, it said.

Base metals will probably be the greatest beneficiaries of China’s intensifying policy-easing measures this quarter, Morgan Stanley said. The bank maintained its positive outlook on copper amid a global shortage and expects prices to average $7,055 a ton in the second half of this year and $7,397 in 2015. It traded at $7,119.50 this morning in Tokyo.

“Copper, lead, and zinc supply-demand balances are already in deficit,” the bank said, adding that nickel and aluminum are headed in that direction.

Morgan Stanley also raised its average price estimates for aluminum by 7 percent to $1,830 a ton in 2014 and 6 percent to $1,913 in 2015, while the bank increased its estimates for zinc by 3 percent to $2,123 in 2014 and 1 percent to $2,348 in 2015.