Also, the actual impact of the recently permitted commodity hedging on international commodity exchanges is unlikely to help consumers get products listed under open general licensing (OGL) at lower prices prevailing in the global markets. For one, the continued existence of bottlenecks in the domestic infrastructure (ports, railways) prevents total annual imports/exports of more than one million tonnes of metals in the country.

During 1998, domestic metal prices were not in tandem with those prevailing on the London Metals Exchange (LME). There were many instances during whichthe domestic metals prices were contrary to those prevailing on the LME and this is likely to be repeated in 1999.

Copper: The total copper smelting capacity in the country is likely to go up by around 1.5 lakh tonnes to around 3.25 lakh tonnes, leaving a gap of 0.50 lakh tonnes for imports to meet local demand of around four lakh tonnes. This will therefore, keep any possible price hike under check during 1999.

On a year-on-year basis, domestic copper prices were down by four per cent.Defying global trends, Hindustan Copper, for one, had tried to raise the prices for its various products several times during the year. But each price-rise met with resistance, and analysts do not expect these price-rises to be sustained during 1999. Birla Copper has new copper smelting capacity of one lakh tonnes (at Dahej in June). Sterlite will add around 0.5 lakh tonnes (to 1.5 lakh tonnes) and equally by Hindustan Copper. SWIL will add 50,000 tonnes to its copper smelting capacity by end-1999. All this will seelower copper imports than in 1998.

Aluminium: Aluminium prices increased by two per cent during 1998. Domestic producers were relatively successful in defying global trends by raising prices, primarily because of the non-functioning of aluminium smelter of Nalco in the first half of the year. This saw domestic aluminium prices higher than on the LME and gave them operating margins up to 35 to 45 per cent.

In 1999, aluminium prices are likely to look up, primarily on two counts. First, the supply-demand gap is likely to widen following the non-implementation of the much-awaited Birla Aluminium project in Orissa.

Secondly, higher special import duties (of five per cent in the last budget) on finished products have made imports costlier, helping domestic producers to raise prices.

Thirdly, as per the latest CMIE data, the cumulative production in 1998 at 3,02,800 tonnes was less compared to 3,14,300 tonnes during the same period in 1997. With the demand at 3.25 lakh tonnes, it is but natural forthe price to be maintained. Currently, aluminium prices are stable at Rs 84 per kg in the Mumbai market, but analysts expect this to go up by another Rs 2 in the first quarter of 1999 because of the supply-demand gap.

Steel: The fate of the spate of unfinished and new infrastructure projects that are lined up will define the fortunes of domestic steel producers in 1999. The financial closures of some of these would embolden steel producers to jack up their prices.

During the last few weeks of 1998, traders appeared bullish about the sustainability of the price hike in steel products impacted by producers in November, following the announcement of floor price for imported finished goods.

If infrastructure projects achieve financial closure, prices of long products would rise by around Rs 300 to Rs 1,000 per tonne. Once the price of long products -- namely tor steel and bars go up -- prices of flat products too would rise by around Rs 1000 to Rs 1,500 per tonne.

The reason for the price rise issimple. As per estimates by SBI Capital Markets, one power project of 500 MW requires 0.5 million tonnes of steel. The clearing of a dozen projects would mean that at least five million tonnes of additional steel would be required -- both longs and flats together -- this year alone.

Even when the total capacity of flat steel products has gone up by five million tonnes in 1998 to around 15 million tonnes, the total availability would be around 12.5 million tonnes. This is because of the commissioning problems faced by both Jindal Vijayanagar and Ispat. Analysts do not expect these two plants to be able to produce more than five lakh tonnes next year, and hence, if the infrastructure projects do come through, the possibility of a shortage of flat products more than that of the long products.

Further, the planned capacity addition in the long products (by Malvika Steel, Usha Ispat and Lanco Steel) is unlikely to materialise this year.

So, unlike in long products, prices of flat products, can fall ifinfrastructure projects do not come through in 1999.

Galvanised steel: The galvanised plates/galvanised coils (GP/GC) segment witnessed a negative growth rate of one per cent in 1997-98. The growth rate was some what stabilised by 2,50,000 tonnes of exports. In 1999, the export market is unlikely to absorb similar quantities.

As a result, domestic manufacturers are entangled in devising both, production and pricing strategy during 1999. But there seems to be a consensus that prices can fall below Rs 24,000 per tonne in the next year.

Tinplate: Tinplate price may rise, even when the demand growth may not be as strong as during last year, which saw a growth of 18 per cent. Last year cheap imports from Japan/Korea resulted in abnormally low prices in India. But traders believe that next year the price-rise could be as much as Rs 6,000 per tonne.

The crucial aspect would be pricing of chromium-coated sheet which is giving a tough competition for tinplates in the packaging sector.

Pigiron: Pig-iron prices may rise by another Rs 1,075-1,200 per tonne in 1999 as currently the prices ruling are below the cost of manufacture. Two blast furnaces -- Rashtriya Ispat Nigam Ltd and Steel Authority of India Ltd -- are closed recently, thereby reducing the total inventory in the system. This leaves scope for price rise.

Zinc: The cumulative zinc production at 1.7 lakh tonnes in 1998 was lower than in 1997. With annual demand at 2.4 lakh tonnes, there are bright chances for price rise of zinc products in the first quarter of 1999. In the month of December, Hindustan Zinc had increased price of zinc by Rs 2,000 per tonne.