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Ashok B Sharma
New Delhi, Jan 3: The Asian currency crisis had a major impact coupled with the weak demand and an increase in production of certain commodities had a telling effect on global commodity prices during 1998. This situation is likely to continue at least up to mid 1999.
A downtrend in prices of aluminium, copper lead, nickel, tin and zinc has been noticed on the London Metal Exchange (LME) towards the end of 1998. This downward trend is expected to continue in the new year, particularly in aluminium. Spot aluminium prices are forecast to fall by eight per cent in 1999 to average $1,250 per tonne.
In December 1998, the average price of copper rallied around $1,453 per tonne on the LME. The average price of lead was $501 per tonne, that of aluminimum $1,221.5 per tonne, nickel $3,800 per tonne, tin $5,240 per tonne and zinc $954 per tonne.
World consumption of primary aluminium is expected to rise by 1.5 per cent to 22.1 million tonne in 1999 after a year of stagnation. Global aluminium production is likelyto rise to 22.6 million tonnes in 1999.
Similarly zinc prices may fall by seven per cent to $950 per tonne in 1999 due to weak demand from Asian and west European countries and the US coupled with the likely steady increase in production by five per cent to 7.85 million tonnes. Global demand for zinc is likely to rise by only one per cent to 7.83 million tonnes in 1999. Global lead mine production is slated to rise by 3.4 per cent to 3.2 million tonnes in 1999 while lead metal production is likely to rise by four per cent to 6.26 million tonnes in the same year.
Domestic steel prices particularly those of flat steel dropped by more than seven per cent in the last six months. Steel plates were cheaper by 7.5 per cent, mild steel angles six per cent cheaper and ingots 4.3 per cent cheaper despite protectionist sops given to the industry in pricing.
Global prices of fertilisers and sugar are also ranging lower. Urea prices are particularly lower due to a ban on urea import by China since 1997 and fall inimports by India by 51 per cent or 1.2 million tonnes in 1998 as compared to the previous year. But urea imports are likely to increase in 1999 as domestic urea production in 1998 is only 10 per cent as against 14 per cent recorded in the previous year and no new investment proposals are likely to take place in absence of a long-term fertiliser policy.
The sugar industry in India is also handicapped in the absence of a long-term sugar policy. Although the government has delicenced the industry and reduced the cane zoning distance of mills to a radius of 15 km, these measures are not looked upon favourably by the industry and no major investments are likely to take place. There is a carryover stock of 55 lakh tonnes of sugar coupled with estimated 155 lakh tonnes sugar production in the current year. The sugar industry is unable to export sugar due to the prevailing low global prices and decanalisation of sugar exports. Earlier when sugar was the canalised item for export, the industry was able to exportsugar by sharing both the profits and losses amongst themselves.
Rubber futures settled lower at around 80.5 yen per kg on the Tokyo Commodity Exchange and Osaka Mercantile Exchange due to rumours of possible impeachment of US president Bill Clinton and the weakening of yen.
The prevailing crude oil prices in the global market in 1998, helped Indian oil companies to pay for the oil bonds and other dues, besides lowering to cost of production of petroleum products. But this benefit is yet to reach the ultimate consumers. The recent air attack by US and UK on Iraq has indicated that sanctions on Iraq are likely to stay and that crude prices will not decline further.
Regarding spices and processed fruits and vegetables, the country recorded a decline in exports in the period April-September, 1998 by four and 3.46 per cent respectively. Export of spices was only 44.4 per cent of the targeted level for 1998-99. In the current period under discussion, exports of spices to US declined by one per cent, itdeclined by 10 per cent in the case of exports to UK and by 15 per cent in case of exports to UAE.
However, the exports of spices marked an increase in case of Mexico, Saudi Arabia, Egypt, Australia, Brazil, Bangladesh and Denmark with growth rates ranging between 25 to 337 per cent.
Similarly, export of fruits and vegetables was only 21 per cent of the target set for the year. But in spite of this, exports to Japan registered a growth of 61 per cent followed by 36 per cent to Saudi Arabia, 14 per cent to France and nine per cent to the US. Exports dropped by 50 per cent in case of UK and by 19 per cent to Kuwait.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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