Readings: Commodities crash, Gulf’s cash pile, Daily S&P moves
- Business Standard: Commodity price crash hurts firms
The crash in commodity prices is hurting companies as many are carrying huge inventories of raw material, and in some cases, finished goods made with raw material bought at higher prices.
A leading paint-maker conceded that the company stuck with raw material of petrochemical and natural products, whose prices have crashed 30-50 per cent from their peaks.
Orissa Minerals Corporation (OMC), a PSU which mines and sells chrome ore, has reduced prices of the ore by 40 per cent last quarter but finished product (ferrochrome) prices have fallen by 50-60 per cent.
. . . globally scrap prices have started moving up, which is the first sign of recovery in demand. Steel companies have signed long-term contracts for iron ore ($84 a tonne) and coking coal ($305 a tonne) but prices will be revised only next year though spot prices have crashed. New contracts are likely to be signed at $100-$150 a tonne for coking coal and at $50 a tonne or lower for iron ore.
- Business Intelligence Middle East: Gulf’s huge cash pile is a ‘global anchor’
For every QAR 3.65 issued by the Qatar Central Bank, it has almost US$3 in reserves. Qatar as well as other Gulf states have emerged as saviours in the current financial crisis, Adhip Chaudhuri, an economy professor said yesterday.With the exception of Kuwait, where people participated in the ‘derivative dance’ that preceded the current economic meltdown, Qatar, Saudi Arabia and UAE have huge dollar surpluses that they can use as a cushion.
It is hard to believe that with oil prices at $55, this cash cushion will last very long. And building very, very tall towers & palm-shaped islands doesn’t seem consistent with creating economic value.
Volatility begets volatility, until it doesn’t. And here’s a thought I came across: “during very volatile times, there are few voluntary buyers or sellers. Only forced sellers”.
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