Int Commodities.pptx

PowerPoint Presentation

INTERNATIONAL COMMODITY MARKETS SUBMITTED BY:ANANT HARICHANDAN 66NIKHIL KUMTA - 70KARISHMA LUHARUKA 71SUBHMOY DAM 91RAJIV TOLANI - 93

COMMODITY EXCHANGESExchange where various commodities and derivatives are traded

Most commodity markets across the world trade in agricultural products and other raw material and contracts based on them

Contracts can include spot prices, forwards, futures and options on futures

POPULAR EXCHANGESName Of Exchange Major Commodities traded in exchangeNew York Mercantile Exchange (NYMEX)Crude Oil, Heating OilChicago Board of Trade (CBOT)Soy Oil, Soy Beans, CornLondon Metals Exchange (LME) Aluminium, Copper, Tin, Lead, Zinc, NickelChicago Board Option Exchange (CBOE)Options on Energy, Interest rateTokyo Commodity Exchange (TCE) Silver, Gold, Crude oil, RubberMalaysian Derivatives Exchange (MDEX)Rubber, Soy Oil, Crude Palm OilCommodities Exchange (COMEX) Gold, Silver, Platinum, CopperMulti Commodity Exchange (MCX)Gold, Silver, Crude Oil, Mentha, Soy Oil, CPO, Copper, Zinc, LeadNational Commodity & Derivative Exchange(NCDEX)Guar Seed, Chana, Soybean, Soy Oil, RM Seed, Pepper, Jeera, Turmeric, Chilli , Sugar

CHICAGO BOARD OF TRADE(CBOT)Established in 1848

Worlds oldest futures and options exchange

50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and electronic trading

Volumes at the exchange in 2003 were a record breaking 454 million contracts

In 2007, the CBOT and the CME merged to form the CME Group

ContdTrading platform of CBOT

The pitOpen-outcry tradingTrades are made in the pits by bidding or offering a price and quantity of contracts, depending on the intention to buy (bid) or sell (offer)

Electronic tradingElectronic trading platforms operate virtually around the clock

MULTI-COMMODITY EXCHANGE(MCX)Established in 2003

Based in Mumbai

The MCX is a demutualized electronic multi commodity futures exchange, and enables future trading of various agricultural and non-agricultural commodities

MCX offers trading in varied commodity futures contracts across segments including bullion, ferrous and non-ferrous metals, energy and agricultural commodities

ContdMCX has been certified to three ISO standardsISO 9001:2008 quality management standardISO 27001:2005 information security management standardISO 14001:2004 environment management standard

Worlds 3rd largest commodity futures exchange in terms of the numbers of contracts traded in CY2012

Became Indias first listed exchange on March 9, 2012

In 2013, Best Commodity Exchange of the year award by Global Cotton Conference

ContdGlobally, MCX ranks no. 1 in silver, no. 2 in natural gas, no. 3 in crude oil and gold in futures trading

The highest traded item on MCX is gold

It is regulated by the Forward Markets Commission

CRUDE OILOne of the largest commodity traded & imported in India

Naturally occurring thick dark brown flammable liquid which is obtained from fossil fuels

Recovered mostly through oil drilling which is then refined into a large number of consumer products like petrol, kerosene, plastics & pharmaceuticals

TYPES OF CRUDE OILWest Texas Intermediate

Brent Crude

Dubai Crude

Russian Export Blend

ContdExports during July, 2014 were valued at US $ 27727.60 million

Imports during July, 2014 were valued at US $ 39956.23 million Oil imports during July, 2014 were valued at US $ 14354.8 million

Oil imports from Aug to Sep 2014 were valued at US $ 9525.3million

Total Oil Imports is around $110 billion

India is going to pay $3 billion in rupees to iran11

Nearly 80% of crude oil consumption is imported by India

Mainly from middle east countries like Saudi Arabia, Iraq & Iran

ONGCIndias largest oil & gas exploration & production company producing 69% of crude oil.(30% of demand)

Aiming to double its production with a growth rate of 4-5% through the development of multiple fields

Increase its production output to 20 million tons by 2018 & 60 million tons by 2030 from 8.75 million tons this fiscal

ContdONGC Videsh has stake in 33 oil and gas projects in 16 Countries

ONGC Videsh made successfully new acquisitions in last one and half year by investing more than USD 4 billion

It is going to spend $20 billion to realize its target of a sevenfold increase in oil & gas output from overseas assets by 2030

Encouraging state run companies to invest in acquiring oil & gas assets abroad.

AGRICULTURAL COMMODITIESCereals-Wheat

Plantation-Rubber

Oils and seeds-Crude Palm oil

Fiber-Kapas

Spices-Cardamom

Other - Almonds

WHEATCombined production of all cereals in 2008-09 is estimated to be 2525 million tonnes. Annual global wheat production - 600-630 tonnes. EU-27, China, India, USA and Russia are the five major producers of wheat accounting for close to 70% of the total global production, with 2008-09 production in these regions being 151, 112.5, 78.6, 68 and 63.8 million tonnes respectively.Wheat is the most important cereal traded in the world market. The global trade in wheat during 2008-09 was sharply up at around 140 million tonnes in 2008-09 from an average of around 110 - 115 million tonnes in the recent previous years.While US (25 - 35 million tonnes), EU-27 (15-25 million tonnes), Canada (15-20 million tonnes), Australia (8-18 million tonnes) and Argentina (6 - 12 million tonnes) are major exporters. The major importing regions are Middle-east Asia, South-east Asia and North-west Africa. Egypt, Brazil, Indonesia, Algeria are the most important importing nations.

RUBBERThailand, Indonesia, India, China, Malaysia, Vietnam are the major producers of rubber in the World.

The global production fluctuates between 6-8 million tons, with a production of 7.9 million tons in 2003, of which Asian countries have produced 6.76 million tons.

On the consumption front, global NR consumption is 7.89 million tons in 2003, of which 1.9 million ton was consumed in India and China alone. The total synthetic rubber consumption in 2003 was 1.13 million ton.

Around 60 % of the global rubber production is used by the transportation sector. In this sector, natural or synthetic rubber cannot be used individually and has to be blended.

CRUDE PALM OILPalm oil with an annual production of 25-27 million tons is second most produced oil in the world.

Malaysia (13 million tons) and Indonesia (10 million tons) are the major producers. They together account for 85% of production.

Around 80% (21-23 million tons) of global production is exported. Malaysia and Indonesia with 12-12.5 and 6-7 million tons respectively are major exporters.

India, China and EU are the major importers.

Price competitiveness has been reason for increased consumption of this oil.

Important World Palm oil Markets Bursa Malaysian Derivatives (BMD) is the largest futures market for crude palm oil.

Malaysian & Indonesian FOB prices set the mood in the physical market.

KAPASThe world cotton area and production are estimated at around 30-31 million hectares and 20 million tons respectively.The biggest cultivators of cotton are America, India, China, Egypt, Pakistan, Sudan and Eastern Europe, with China, US and India being the three largest producers of cotton.US has a considerable share in world exports. India and China both fall short of their domestic requirement and are net importers.Among the consumers China leads the way being followed by India, Pakistan, US and Turkey.

CARDAMOMCardamom is generally produced in the tropical regions of the world. Gautemala is the largest cardamom producing country followed by India.

The total world production of this spice is around 35,000 MT per annum (source: Spices Board).

Consumption of cardamom has sharply increased throughout the world during the last two decades. The major consuming countries of cardamom are the Middle Eastern countries, India, Pakistan, European countries, the US, and Japan. Middle Eastern countries such as Saudi Arabia and the United Arab Emirates, and South-East Asian countries such as India, etc., account for more than 60% of the world's consumption.

Saudi Arabia is the single largest importer of Cardamom in the world, followed by Kuwait. The list of countries / territories that are the major importers is as follows:Saudi Arabia, Kuwait, UAE, USA , Japan, Pakistan, Malaysia, Israel, Australia, Canada, South Africa

ALMONDSAnnual global Sweet almond production - 7 - 8.5 lakh tonnes. United States of America (California) is the single largest producer, consumer and exporter of Sweet almonds, with the country contributing to over 80% of the global almond production.The other producing countries are Australia, Turkey, Chile, European Union, China and India with a production of 26,000 tonnes, 16,000, 9500, 79,800, 1,500 and 1,200 tonnes on a shelled basis in 2008-09. Spain is the single largest producer in the European Union.The annual trade in almonds has been around 4.6 lakh tonnes. The major exporters are US, Australia and Chile with exports of 4,40,000 tonnes, 12,300 tonnes and 6,700 tonnes in 2008-09. European Union, India, Japan, Canada and Turkey are the major importers with imports of 2,00,000 tonnes, 45,000 tonnes, 21,000 tonnes, 19,000 tonnes and 14,000 tonnes in 2008-09.

GOLD & SILVER MARKETS

INDIA ROLE IN WORLD MARKETSSecond biggest consumer of gold

Holds close to 18,000 tonnes (approx 10% of world stock)

7 % of household savings in gold

Large reserves held by RBI

WORLD GOLD COUNCILMarket development organization for the industry

Provides industry leadership whilst stimulating and sustaining demand for gold

Works within investment, technology and jewellery sectors in addition to engaging government sectors

GOLD PRICE FIXINGMarket Making Process

Current participants in the fixing:BarclaysHSBCScotai- Mocatta (Global bullion banking division of Bank of Nova Scotia)Socit Gnrale

Participants must be part of London Bullion Market Association

PROCESS OF GOLD PRICE FIXINGInitiation

Internal Process

Iteration

Fixing

GOLD PRICE FIXING PROCESS FLAWS & FALLOUTSFlaws of the process

Barclays Fixing Saga

Future

SILVER PRICING MECHANISMHistorically , priced like gold , participants being:Deutsche BankHSBC Bank of Nova Scotia

Computerized automated system implemented

Future of all precious metal pricing on similar lines

MMTC Established in 1963

It is one of the two highest foreign exchange earners for India

Turnover of around US$ 10 billion

Largest international trading company of India

1st Public Sector Enterprise awarded the status of "FIVE STAR EXPORT HOUSE" by GOI for long standing contribution to exports

Largest non-oil importer in India

MMTC's diverse trade activities encompass :Third Country Trade, Joint Ventures, Link Deals - all modern day tools of international trading.

Has vast international trade network: includes a wholly owned international subsidiary in Singapore, Asia, Europe, Africa, Oceania and Americas, giving MMTC global market coverage.

ACTIVITIES UNDERTAKENINDIA'S LEADING EXPORTER OF MINERALS

ONE OF THE WORLD'S LARGEST BUYER OF FERTILIZERS

THE SINGLE LARGEST BULLION TRADER IN THE INDIAN SUBCONTINENT

THE BIGGEST IMPORTER OF NON FERROUS METALS & INDUSTRIAL RAW MATERIAL TO INDIA

GROWING INTEREST IN AGRO PRODUCTS WORLDWIDE

GENERAL TRADING IN POWER TRADING AND ENGINEERING PRODUCTS

AN INTEGRATED GLOBAL TRADER WITH BULK HANDLING CAPABILITIES

MINERALSMMTCs co-promoted 1.1. million tpa Neelachal Ispat Nigam Ltd. (NINL) consumes over 2.2 million tons of various types of minerals on annual basis being supplied by MMTC and others.

Largest supplier of Iron Ore, handling about 15% of Indias total exports.

PRODUCTS TRADED ARE:IRON ORE MANGANESE ORE CHROME ORE OTHERS

Destination of Exports Japan, South Korea, China, Middle East etc. The export is both on the basis of long term and annual spot contracts.

MMTC's mineral sales are on FOB basis only.

METALS STRATEGIES OF PURCHASE (IMPORTS)

MMTC imports non-ferrous metals generally on CIF/C&F/CFR Main Indian Ports basis.

The purchase price is based on the LME cash settlement price plus premium.

A variety of tailor-made pricing options to suit the requirements of different customers like monthly average price, flexible quotation period from date of order to 5 to 25 days after B/L date depending on the shipment from load port, spot pricing etc. are offered.

ContdCustomers have the following options for purchase:

High Seas basisEx-godown basisEx-FTWZ basis

MMTC imports metals with split Bill of Lading to cater to the need of small customers who want to buy on high-seas basis. Special incentives are also given to regular customers.

PRECIOUS METALSMMTC is an authorized agency of the Government of India for import of gold, silver, platinum, palladium, rough diamonds, emeralds, rubies and other semi-precious stones and supplies these items to jewellers in India for domestic sales and exports

FOR EXPORTERS:On LoanOutright BasisOn Replenishment Basis

CARBON TRADINGKyoto protocolUnder UNFCCCAdopted by parties to the UNFCCC in 1997Entered into force in 2005Agreement for the protocol to be followed in two commitment periods (2008-12 and 2013-2020)

ContdObjectives of Kyoto protocolCommitment to move away from fossil fuel energy sources (oil, gas and coal) to renewable sources of energy viz. hydro, wind, solar powerCommitment to reduce greenhouse gas emissionsTargets for greenhouse gas emissions reduction were established for each industrialized country. (Annex 1 countries)Developing countries (non-Annex 1 countries) including China and India were asked to set voluntary targets for greenhouse gas emissions.

CONCEPTS IN CARBON TRADINGCarbon CAP-TRADE programCAP : Assignment of an upper threshold limit on the amount of pollutant that can be emitted (measured in Assigned Amount Units or AAUs) by a country.Emission permits or equivalent number of allowances or credits are issued to emit a specific amount of carbon dioxide (cap) to the country.1 credit= 1 ton of carbon dioxideTRADE : the transfer or trade of allowancesExcess or unused allowances/credits can be traded to the countries whose emissions have exceeded their assigned cap.The purchased allowances can be used to increase the allowance limit by the purchasing country.

ContdCarbon offsettingOffset Credits for eco-friendly technologies are purchased by developed nations to avoid or substitute reduction in their own emission.Investments in green technologies and harness alternative forms of energy in the developing nations.

CARBON TRADING IMPLEMENTATION MECHANISMSEmission trading (ET)Countries whose emissions are less than their assigned amount can sell the excess amount to countries whose emissions have exceeded their assigned amount

The Assigned amounts can be defined as a tradable allowances, or commodity, and this free market is known as the CARBON MARKET

ContdClean development mechanism (CDM)Developed countries can fund emission reduction projects (e.g. Solar energy, wind energy and other green technologies) in developing nations that did not sign Kyoto Protocol.

In exchange, the developed countries earn legally recognized emission credits called CERs (Certified Emission Reduction) to offset their emission obligations.

ContdJoint implementation (JI)Developed countries can implement emission reduction projects in another developed or developing country and earn Emission Reduction Units (ERUs)

ERUs can be used to meet the carbon allowance or can be sold in the market.

BENEFITS OF CARBON TRADINGReduction in green house gas emission

Source of revenue for developing nations

Supports a free market system

Impetus for Alternative sources of energy or green technology

DISADVANTAGES OF CARBON TRADINGRight to pollute

Slow process

No effective carbon reduction in the atmosphere

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