India infrastructure sector outlook mostly negative, govt initiatives encouraging: India Ratings

(Commodity News World): India Ratings has maintained an overall negative outlook for Indian infrastructure projects for 2013, considering project companies’ continued weak credit profiles. However, some sub-sectors have a split outlook. The outlook for power projects remains negative while certain pockets in the transportation sector have a stable outlook. 

The agency observes that a range of recent policy initiatives announced by the government are encouraging and have kindled a sense of optimism among market participants. However, it believes that the process of addressing fundamental risks through concrete and sustained on-the-ground actions to repair damaged credit quality is likely to be protracted. The policy initiatives include a presidential directive to the state-owned Coal India Ltd to sign fuel supply agreements, financial restructuring of distribution utilities, constitution of the Cabinet Committee on Investments and the likely introduction of the Land Acquisition Bill in the ensuing Budget session of Parliament. 

India Ratings expects that in 2013 a number of projects are likely to default on their bank debt obligations. Alternatively, lenders might be compelled to approve forced debt restructuring packages. This is in view of their weak financial structures and multiple risks including construction delays, plant stabilisation issues and fuel supply constraints in the power sector and traffic under-performance in the transportation sector. Reduced sponsor capacity to extend support would also likely contribute to this phenomenon. In a majority of the agency’s rated infrastructure projects, sponsors have played a significant role in preserving the credit profile of their projects. Deterioration in sponsor’s profile will impair their ability to keep supporting projects that have a low economic value. 

Some of the macro-economic variables – a pick-up in GDP growth rate, abatement of inflationary pressures and the expected drop in interest rates – may turn favourable during 2013. This may result in cash flows of infrastructure projects experiencing some improvement though the ‘lag’ effect would imply that benefits are unlikely to accrue immediately.

India Ratings maintains a negative outlook for power projects. Many projects face protracted delays in completion – either because of technical issues such as longer plant stabilisation or due to slow land acquisition for plant area, constraints in developing railway and transmission infrastructure and delays in operationalising captive coal mines. Fuel shortage, off take risks and counterparty credit profiles are compounding the issues faced by these projects, making them vulnerable to ratings downgrades. 

Construction delays and traffic underperformance will remain the two most important rating drivers for toll road projects in 2013. Many projects exhibit stable characteristics with drastic rating downgrades averted only on account of expectation of continued sponsor support to fund cost overruns and/or bridge marginal revenue shortfalls in case of operating assets. The ratings of availability-based (annuity) road projects will be stable in 2013 because of low revenue risks and simple maintenance requirements considering the operator-cum-sponsor’s track record in the sector.

The regulatory clarity that has emerged from the recent orders on project costs and the levy of airport development fee has provided relief to airport credits. However, global economic uncertainties and slowing growth in India coupled with rising air fares have led to negative growth in domestic passenger enplanements; international passenger traffic has grown at a slower rate. The agency views this fall in passenger enplanements as cyclical and believes that it is unlikely that long-term forecasts would not be achieved, given the strong growth recorded over the last six-seven years

Copper Has Longest Bull Streak Since October

Copper traders are bullish for a fourth consecutive week, the longest streak since October, as manufacturing strengthens from China to the U.S. and stockpiles decline to the lowest in more than two years.
Thirteen of 29 analysts surveyed by Bloomberg expect the metal to gain next week and six were neutral. Inventories tracked by the London Metal Exchange fell to 289,000 metric tons today, the lowest since August 2009, and orders to withdraw more metal are at an almost eight-year high, bourse data show.
Manufacturing from China to the U.S. is expanding as the American recovery strengthens and European leaders work to contain the region’s debt crisis. That’s boosting demand for raw materials from consumers and investors, with Barclays Capitalpredicting a third consecutive annual shortage in global copper supplies in 2012. Commodities beat stocks, bonds and the dollar for the first time since July last month.
“People feel that the U.S. is on a gradually improving trend and overall the tone is better,” said Carole Ferguson, an analyst at Fairfax IS in London. “If you get a demand-led story in copper then it can rally again. It’s supported by the long-term supply and demand picture.”
Copper rose 13 percent to $8,585 a ton this year on the LME, the best start to a year since 2008. The Standard & Poor’s GSCI gauge of 24 commodities climbed 9.1 percent and MSCI All-Country World Index (MXWD) of equities advanced 11 percent. Treasuries lost 0.5 percent, a Bank of America Corp. index (MXWD) shows.

Manufacturing Gains

China’s manufacturing expanded for a third month and at a faster pace in February, the statistics bureau and logistics federation said yesterday. An Indian purchasing managers’ index released by HSBC Holdings Plc and Markit Economics was near an eight-month high. A U.S. factory index showed growth last month, the Institute for Supply Management said yesterday. China consumes about 40 percent of the world’s copper and North America accounts for 11 percent of demand.
Investors are increasing bets on higher prices on mounting confidence the world will skirt another recession. About $300 million was added to wagers on industrial metals in January, taking the total across commodities to $3.7 billion, Barclays said in a Feb. 29 report. Open interest, or contracts outstanding, across 24 commodities tracked by Bloomberg rose 3.3 percent last month, extending a 9.3 percent advance in January, the first back-to-back monthly gains in a year.
Copper consumption will outpace supply by 376,000 tons this year and there will be another shortage in 2013, Barclays predicts. London-based Rio Tinto Group (RIO), the world’s third-biggest mining company, said Feb. 9 its mined copper output fell 23 percent last year because of lower ore grades.

ECB Loans

Slower growth in Europe may curb manufacturing and weaken construction, which accounts for about 40 percent of copper demand, according to the Copper Development Association. Euro-area manufacturing shrank for a seventh month in February, London-based Markit Economics said yesterday. The European Central Bank awarded 529.5 billion euros ($706 billion) in three-year loans to 800 European banks on Feb. 29, after supplying 489 billion euros to 523 institutions on Dec. 21.
There’s “less enthusiasm associated with the European longer-term refinancing operation,” said Bart Melek, the head of commodity strategy at TD Securities Inc. in Toronto. “Copper should correct next week as prices are likely higher than the fundamentals imply.”

Bernanke Comments

Copper slid 1.2 percent on Feb. 29 after Federal Reserve Chairman Ben S. Bernanke gave no signal that the central bank will take new steps to boost liquidity. He described “positive developments” in the job market while saying it’s still “far from normal” in testimony to lawmakers. Signs that growth prospects are improving in China may mean the government there will refrain from more monetary easing.
Hedge funds and other money managers cut bets on higher copper prices by 11 percent to 13,260 futures and options in the week ended Feb. 21, the first decline in six weeks, Commodity Futures Trading Commission data show. Speculators held wagers the week before at the highest level since August.
The metal’s 14-day relative-strength index is at 57.8. A level of 70 indicates to some analysts who study technical charts that a drop in prices may be imminent and a figure of 30 suggests a rebound may be due.

Gold Survey

Twenty-one of 32 traders and analysts surveyed by Bloomberg expect gold to gain next week. Futures on the Comex in New Yorkplunged 4.3 percent to $1,711.30 an ounce on Feb. 29, and gained 9.2 percent this year. It is in the 12th year of a bull marketand holdings in gold-backed exchange-traded products stand at a record 2,404.2 tons, data compiled by Bloomberg show.
Eight of 13 people surveyed expect raw-sugar prices to decline next week. The commodity climbed 7.2 percent this year to 24.98 cents a pound on ICE Futures U.S. in New York.
Fourteen of 22 people surveyed anticipate higher corn prices next week, while the same amount said soybeans will climb. Corn rose 0.9 percent to $6.525 a bushel this year as soybeans advanced 10 percent to $13.295 a bushel.
“With the second LTRO completed and considering Bernanke’s comments, monetary policy will in all likelihood become less of an immediate market driver going forward,” said Michael Widmer, the head of metals research at Bank of America Merrill Lynch in London. “The extent to which the rebound in the U.S. can be sustained may have more of an influence.”

Gold survey results: Bullish: 21 Bearish: 8 Hold: 3
Copper survey results: Bullish: 13 Bearish: 10 Hold: 6
Corn survey results: Bullish: 14 Bearish: 5 Hold: 3
Soybean survey results: Bullish: 14 Bearish: 6 Hold: 2
Raw sugar survey results: Bullish: 4 Bearish: 8 Hold: 1
White sugar survey results: Bullish: 4 Bearish: 7 Hold: 2
White sugar premium results: Widen: 5 Narrow: 5 Neutral: 3

http://www.bloomberg.com/news/2012-03-02/copper-bull-streak-extends-to-longest-since-october-on-demand-commodities.html

India's energy demand may slow down to 4.5% by 2030

NEW DELHI (Commodity news world ): India's energy demand may slow down to 4.5% per annum by 2030 on improvements in energy efficiency, according to global energy giant BP plc.

According to the report, India's energy imports will jump drastically by 2030 to meet the domestic needs. The country's gas imports will jump 47%, crude oil by 91% and coal will jump 40%.

India's share of industry will continues to grow, as infrastructure development and manufacturing gains and manufacturing expands to absorb a growing labour force.

Meanwhile, according to the report, China and India will be the world’s largest and third largest economies, jointly accounting for about 35% of global population, GDP and energy demand.

India is expected to consume half the total energy consumed by China in 2030.

By 2020, coal will remain the commercial source of energy.

In 1999-2010, India’s annual energy demand growth accounted for 5.5% per annum.

India fertilizer prices surge 65% in June-Nov 2011

NEW DELHI : Due to high global prices and weakening of rupee, the imports of the fertilizers have turned to be costlier. The price of di-ammonium phosphate (DAP) shot up 65% to Rs 18, 500 per ton from Rs 11,000 in June 2011.

The rupee has weakened18% January to November period 2011. The rupee was around Rs 52 against the Dollar on Thursday 24th November.

The Indian Farmers Fertilisers Cooperative Ltd (IFFCO) is negotiating with global fertilizer players for discounts and the some of them have agreed for 5% discounts, reported The Business Line.

According to the IFFCO, there are no plans to hike the Maximum Retail Price (MRP) of the commodity till March 2011.
Earlier, in 2010, the government had de-controlled the price of the non-urea fertilizers by introducing the Nutrient Based Subsidy (NBS).

The DAP and NPK (Nitrogen, phoshorus, potash) are the major fertilizer used in India.