Companies & Sectors
Steel prices to remain under pressure due to adverse weather conditions in Asia, says Goldman Sachs

Natural calamities that have occurred in Asia recently will create some pressure on prices till the end of December, according to the investment banker

Investment bank Goldman Sachs has said that it expects steel prices to remain under pressure till the end of this year due to adverse weather conditions in Asia, China's energy-conservation measures, rising inventories and lower capacity utilisation in the developed world, resulting in sluggish demand.
 
"Due to uncertain weather conditions, the Asian construction sector generally sees less activity in the period of July-September and so prices for the metal can go down. However, natural calamities have occurred late in the period, which will create some pressure on prices till the end of December," said Goldman Sachs in a report.
 
The Asian construction sector consumes about half of the region's steel production.
 
In south and south-east Asian countries, demand for steel from the construction sector has been largely affected due to natural calamities which occurred recently. There has been heavy flooding in many countries like China, India, Pakistan, Vietnam, Thailand and Indonesia, the report said.
 
Even countries like Korea, which have not been affected by natural disasters, are seeing a slowdown in construction activity, Goldman Sachs added.
 
According to the World Steel Association (WSA), crude steel production in China, the world's largest producer and consumer of the metal, fell 5.9% during September to 47.9 million metric tonnes (MMT) from the same month last year. The WSA said that Japan's crude steel output stood at 9.2MMT in September, up 11.7% compared to the same month last year, while South Korea's crude steel production increased 3.2% to 4.7MMT.
 
Energy-conservation measures in China have also forced steel producers to curb production. In addition, steel consumption in that country will be affected as the Chinese government has decided to limit multi-home ownership, said analysts. Construction accounts for half of the steel demand in China.
 
"Steel demand in China has come down due to a slowdown in the construction sector. The pace of growth has fallen but there is still some demand, so steel prices will not be affected adversely at least till December," said an analyst from Elara Securities (I) Pvt Ltd.

Asian steel consumption is running at an average utilisation rate of 86% against 69% for the US and 73% for Europe. Even capacity utilisation rate of Japanese steel majors like Nippon Steel Corp and JFE Steel Corp during July to September 2010 was 96% and 86% respectively, against 77% for US Steel and 71% for ArcelorMittal, the world's largest steelmaker. Higher utilisation rates in Asia are helping to offset some seasonal weaknesses, the report said.
 
"Steel demand in Europe and the US is recovering at a very slow pace which is putting pressure on prices. Lower capacity utilisation by European and US steel majors indicates muted demand in these countries. Europe particularly may remain weak due to the summer season and as the holiday season begins by December," an analyst from a Mumbai-based research firm said.
 
ArcelorMittal also painted a bleak picture for steel consumption during the October to December period, due to slowdown in demand in China, muted recovery in developed countries and rising raw material cost.
 
The steel major said it expected October-December EBITDA at $1.5 billion-$1.9 billion, against $2.26 billion in the July-September period, due to weak realisation.
 
"Our outlook for Q42010 remains cautious as the expected higher input prices continue to work through the business and demand remains muted, though with some regional differences," said LN Mittal, chairman and chief executive, ArcelorMittal, in a presentation to investors.
 
Goldman Sachs believes that lack of confidence among buyers may also put pressure on steel prices till December.
 
"Our channel checks with traders suggest that while demand in certain
segments/markets remains strong, there is a crisis of confidence leading to a buyers' strike," the investment bank said.
 
However, Goldman Sachs is optimistic about steel prices post December due to downward correction in inventories and rebound in construction activity, particularly in Asia.
 
"Furthermore, there is a belief that construction activity is only delayed, not cancelled. When the weather improves, one can expect demand to recover even stronger than usual due to all the pent-up demand for construction. If anything, Asian governments may have to spend on reconstruction activity after the bad weather," the report said.
 

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Personal finance Tuesday

HDFC Mutual Fund launches HDFC FMP 35D November 2010 (1); Birla Sun Life MF unveils Birla Sun Life Short Term FMP-Series 2; BNP Paribas MF launches BNP Paribas Fixed Term Fund-Series 19 B; ICICI Pru MF unveils ICICI Pru Fixed Maturity Plan-Series 53-1 Year Plan B; HDFC Mutual Fund floats HDFC FMP 100D November 2010 (1)

HDFC Mutual Fund launches HDFC FMP 35D November 2010 (1)

HDFC Mutual Fund has launched HDFC FMP 35D November 2010 (1), a close-ended income scheme.

The investment objective of the plan is to generate income through investments in debt/money-market instruments and government securities maturing on or before the maturity date of the respective plan. The scheme will invest 100% of the assets in debt securities and money-market instruments having low to medium risk profile.

The tenor of the plan is 35 days from the date of allotment. The plan offers growth and dividend options. The exit load for the plan is nil. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO opens on 9th November and closes on 11th November. The minimum investment amount is Rs5,000. The minimum target amount is Rs1 crore.CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Miten Lathia are the fund managers.

Birla Sun Life MF unveils Birla Sun Life Short Term FMP-Series 2

Birla Sun Life Mutual Fund has launched Birla Sun Life Short Term FMP-Series 2, a close-ended income scheme.

The scheme seeks to generate income by investing in fixed-income securities maturing on or before the duration of the scheme. The scheme will have duration of 90 days from the date of allotment. The scheme will invest 100% of the assets in debt securities and money-market instruments having low to medium risk profile.

The scheme offers growth and dividend (payout) option. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO opens on 9th November and closes on the same day. The exit load for the scheme is nil. The minimum investment amount is Rs5,000. The minimum target amount is Rs10 crore.CRISIL Short Term Bond Fund Index is the benchmark index. The scheme is managed by Kaustubh Gupta.

BNP Paribas MF launches BNP Paribas Fixed Term Fund-Series 19 B

BNP Paribas Mutual Fund has launched BNP Paribas Fixed Term Fund-Series 19 B, a close-ended income scheme.

The investment objective of the scheme would be to achieve growth of capital through investments made in fixed-income securities maturing on or before the maturity of the scheme. The scheme would invest 100% of its assets in debt and money-market instruments having low to medium risk profile. Maturity date of the scheme would be 370 days from the date of allotment of units. The scheme offers growth and dividend (payout) option. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO closes on 15th November. The exit load on the scheme is nil. The minimum investment amount is Rs5,000.CRISIL Short Term Bond Fund Index is the benchmark index. Alok Singh is the fund manager.

ICICI Pru MF unveils ICICI Pru Fixed Maturity Plan-Series 53-1 Year Plan B

ICICI Prudential Mutual Fund has unveiled ICICI Prudential Fixed Maturity Plan-Series 53-1 Year Plan B, a close-ended income scheme.

The investment objective of the plan is to seek to generate regular returns by investing in fixed-income securities/debt instruments which mature on or before the date of maturity of the plan. The tenure of the plan is 371 days.

The plan offers growth and dividend (payout) option. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO opens on 9th November and closes on 12th November. Since the plan will be listed on the stock exchange, load will not be applicable.The minimum investment amount is Rs5,000.CRISIL Composite Bond Fund Index is the benchmark index. Chaitanya Pande is the fund manager.

HDFC Mutual Fund floats HDFC FMP 100D November 2010 (1)

HDFC Mutual Fund has launched HDFC FMP 100D November 2010 (1), close-ended income scheme. The investment objective of the plan under the scheme is to generate income through investments in debt /money-market instruments and government securities maturing on or before the maturity date of the plan.

The tenor of the scheme is 100 days from the date of allotment. During the new fund offer, the units will be offered at face value of Rs10 per unit. The new issue opens on 9th November and closes on 11th November.

The scheme offers growth and dividend options. The minimum investment amount is Rs5,000.CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Miten Lathia are the fund manager.

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Remittance to India, developing nations to rise to $370 bn: WB

Washington: Notwithstanding the recent global financial crisis, remittance flows to developing countries including India is expected to touch $325 billion by the end of this year and is likely to exceed to $370 billion in two years' time, reports PTI quoting a World Bank report.

According to the World Bank's latest Migration and Remittances Factbook 2011, remittance flows to developing countries is expected to reach $325 billion by the end of this year, up from $307 billion in 2009.

Worldwide, remittance flows are expected to reach $440 billion by the end of this year.

"Remittances in 2008 and 2009 became even more of a lifeline to poor countries, given the massive decline in private capital flows sparked by the crisis," Dilip Ratha, manager of the migration and remittance unit at the World Bank said.

Remittance flows to developing countries is expected to cross $370 billion, but this outlook is subject to the risks of a fragile global economic recovery, volatile currency and commodity price movements, and rising anti-immigration sentiment in many destination countries, the report added.

Mr Ratha further added, "High unemployment is prompting many migrant-receiving countries to tighten immigration quotas, which would probably slow the growth of remittance flows. Also uncertain currency movements can have unpredictable effects on remittance flows."

In addition to crisis-related risks, regulations to combat financial crime have become a roadblock to the adoption of new mobile money transfer technologies for cross-border remittances.

"There is urgent need to reassess regulations for remittances through mobile phones and mitigate the operational risks," Mr Ratha said.

As per the report, India, China, Mexico, the Philippines, and France have been top recipient countries in 2010 so far.

According to the Factbook 2011, the top migrant destination country is the United States, followed by Russia, Germany, Saudi Arabia, and Canada.

The top immigration countries relative to population are Qatar (87%), Monaco (72%), the United Arab Emirates (70%), Kuwait (69%) and Andorra (64%).

The report further added that Mexico-United States is expected to be the largest migration corridor in the world this year, followed by Russia-Ukraine, Ukraine-Russia, and Bangladesh-India.

Some developing regions in Europe and Central Asia, Latin America and the Caribbean, the Middle East and North Africa, and Sub-Saharan Africa witnessed larger-than-expected falls in remittances in 2009, while flows to South Asia in 2009 grew more than expected. Those to East Asia and Pacific rose modestly.

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