Smouldering Hot – For Now

PRICES OF IRON ORE (62% iron ore content) have gone past the May low as the market continues to weigh on Chinese resource demand following the government's stimulus to bolster the country's deteriorating economy. Hot metal production averaged 2.5 million tonne a day in China — the highest since October 2020 — suggesting that steel mills in the world's top iron ore consumer are returning back to full capacity. Not surprising that India's biggest iron ore producer NMDC, too, has hiked prices for the first time in the current fiscal (FY24).

Bitter-sweet Impact of Crop Shortage

COCOA FUTURES in the U.S. continued their upward trajectory, surpassing the $3,500 mark for the first time since March 2011 as investors anticipate a supply deficit owing to two consecutive years of shortages, resulting in a global stocks-to-use ratio of 32.2% — the lowest since the 1984-85 season. The International Cocoa Organisation has forecast a global deficit of 1,46,000 tonnes for crop season 2022-23. However, since Indian chocolate makers use locally available vegetable fat, whose prices have halved, it has helped negate the impact of higher cocoa bean prices.

The Lining Is No Longer Silver

ALUMINIUM PRICES have been losing ground after peaking in December 2022. Future prices have come off from $2,479 to $2,150 as power curbs in the Yunnan region of China eased, leading to the resumption of aluminium production. China is the world's largest aluminium producer with 59% production share. If prices continue to trend lower, base metal producers such as Hindalco and Vedanta will feel the heat on their bottom lines.