Commodity Weekly Research Report Ways2Capital 27 April 2015

INDORE, India - April 29, 2015 - PRLog -- ✍MCX - WEEKLY NEWS LETTERS

✍INTERNATIONAL NEWS

✍World steel demand to decrease in 2015: Worldsteel

Global steel use should grow at a slightly slower pace this year than last because of China's slow down, although elsewhere steel use is mostly improving and 2016 prospects look brighter, the World Steel Association said on Monday.

"We hear increasingly positive use from developed economies, especially ... the euro zone. In the developing world we see increased optimism about India and growth in the MENA and ASEAN countries," said Hans Jurgen Kerkhoff, chairman of the group's Economics Committee.

"While these developments will not be enough to counter-balance the deceleration of China, we expect to see gradually improving growth prospects beyond 2016," he added. Global apparent steel use - steel both known and assumed to have been used - is expected to grow by 0.5 percent this year to 1.544 billion tonnes, compared with growth of 0.6 percent last year, Worldsteel said.

This primarily because use in China, which accounts for about half of the world's steel consumption, is expected to fall 0.5 percent to 707.2 million tonnes from last year. Next year, however, global apparent steel use is expected to grow 1.4 percent to 1.566 billion tonnes. Emerging and developing economies should be up 4 percent, developed economies 1.8 percent.

Global steel prices are nonetheless currently languishing at their lowest levels in nearly six years amid structural oversupply. Usage in China, the world's second largest economy, is falling and it produces about 100 million tonnes more than it consumes. Beijing is introducing measures to cut excess steel capacity but there is a question about how successful it will be. Also a concern, especially for miners of iron ore, a key steelmaking ingredient, is whether Chinese steel use has peaked. Iron ore prices have plunged some 60 percent since last year after a concerted effort by major producers to expand output and boost their market share by driving out high cost rivals. An iron ore glut has since built, one that would not easily disappear if Chinese steel use is in long term decline.

"China is at the beginning of long and flat peak steel use. The peak might stretch over 3-5 years, with (demand) hovering around 720-750 mln tonnes, then we may see a gradual decline to 680 million tonnes in the mid-2020s," Worldsteel director general Edwin Basson said. "So we don't see a rapid increase in iron ore costs in our industry.

✍China cuts bank reserves again to counter slowdown

China's central bank on Sunday cut the amount of cash that banks must hold as reserves, the second industry-wide cut in two months, adding more liquidity to the world's second-biggest economy to help spur bank lending and combat slowing growth.

The People's Bank of China (PBOC) lowered the reserve requirement ratio for all banks by 100 basis points to 18.5 percent. The reduction is effective from April 20, the central bank said in a statement on its website www.pbc.gov.cn.

The latest cut in the reserve requirement shows how the central bank is stepping up efforts to ward off a sharp slowdown in the economy. Weighed down by a property downturn, factory overcapacity and local debt, growth is expected to slow to a quarter-century low of around 7 percent this year from 7.4 percent in 2014, even with expected additional stimulus measures.

The PBOC last cut the reserve requirement ratio for all commercial banks by 50 basis points on February 4, the first industry-wide cut since May 2012. The central bank has also cut interest rates twice since November in a bid to lower borrowing costs and spur demand.

✍Russia has bigger concerns than oil, ruble: Russia Dep PM

Faced with the triple whammy of plunging oil prices, currency volatility and Western sanctions, there's no dearth of challenges for Russia's ailing economy, but Deputy Prime Minister Arkady Dvorkovich said what hurts most is the scarcity of financing for new investments.

"The shortness of financing for new investments is where the Russian economy is being hit in the most important way," Dvorkovich told CNBC on the sidelines of World Economic Forum on East Asia in Jakarta.

"How do we deal with this? We are working with new partners. This is why we are in China, in other countries, looking for new partners who can bring new investments into the country," he added. Russia's economy, which grew by just 0.6 percent in 2014, is expected to enter a deep recession this year under the weight of lower oil prices and sanctions, which have compounded the country's underlying structural weaknesses and undermined business and consumer confidence.

Earlier this month, the International Monetary Fund (IMF) slashed its growth outlook for the country, forecasting a contraction of 3.8 percent in 2015 and 1.1 percent in 2016. Its earlier estimate was for a contraction of 3 percent this year and 1 percent next.

Nevertheless, Dvorkovich says the country has built up enough reserves to weather the rout in the commodities market.

"We were not counting on higher oil prices in our economic policies. We were saving some money for the times like what we face now, so we have reserves that allow us to smooth this stage and to help poor families and increase unemployment benefits," he said.

As for the precipitous fall in the ruble over the past year, Dvorkovich said the implications are not all negative as it gives Russian manufacturing and agricultural exports a pricing edge in global markets.


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