Editor's Desk

NMDC has intimated customers of 34-56% increase in iron ore prices across various grades effective April 1st, with iron ore fines prices increased by 34% to Rs2600/MT. Prices for iron ore fines were earlier increased by 16% in Jan 10. As per our calculations, the effective price increase for iron ore fines from Dec-09 is Rs927/MT, 55%.

NMDC talked about a potential re-working of its annual contracts, possibly in favor of quarterly contracts. However there is no news flow on the same so far. The above 34% price increase is ‘provisional’ as per the media report, with a final price increase likely to be communicated later (but would be effective from April 1.

Based on $200/MT coking coal and the latest NMDC iron ore prices, the total cost push for a non integrated steel mill, dependent

The most attention-grabbing aspect of the March PMI release was the surge in input prices to a new series high of 67.4, suggesting that companies are facing sizeable and mounting cost pressures. The survey also indicates that manufacturers are becoming more willing to pass on some of these increases in the form of higher output prices (54.6 from 52.1).

While the results were no doubt impacted by the one-off duty hikes announced in the budget, the RBI can’t afford to ignore the

Contract prices cross USD 100/t to reach all-time highs; yearly contracts give way to quarterly contracts
Yesterday, Vale settled with five Japanese steel mills (Nippon Steel, JFE Steel, Sumitomo Metals, Kobe Steel and Nisshin Steel) with a ~90% increase in contract prices implying prices of USD 100 to 110/t depending upon grade. This is only for the Apr-Jun-10 quarterly and is broadly in line with the recent newsflow.

This surpasses the previous high of USD 90/t agreed in 2008. Indian spot iron ore prices are currently at USD 125/t FOB (63% grade).

Read moreIron ore contract prices surpass all-time highs

Planning commission cut India’s XI plan (FY08-12) core Infra capex (ex-Telecom) by 5% led by slippages at Railways, port and roads, while maintaining overall doubling of capex to Rs20.5tr, in a mid-term review. This reinforced our view of a 10 year extended cycle for E&C companies apart from allaying the fear of slowdown in their earnings on a higher base (8th year of this cycle). Govt. reiterated XII plan (FY13-17E) Infra capex of Rs40tr / US$880bn, taking total (FY08-17E) to Rs60tr / US$1.3tr. This creates a macro framework for robust sustainable growth & has potential to drive E&C cos into a higher orbit of size & value.

Read moreInfra Capex Cut by 5% but Still Robust

We have seen lot of talk on the Chinese Bubble. But it is for real since Citi’s Chief Economists Willem Buiter [UK] and Minggao Shen [HK] just a while ago published a joint Report in the same. The main highlights of the report are,

• China avoided a prolonged downturn by aggressively expanding credit growth since the end of 2008.
• Higher reserve requirements and selective quantitative credit controls have not dampened credit growth sufficiently.
• Higher interest rates and Yuan appreciation are necessary to prevent further overheating in the real economy.
• Additional macroprudential controls are required to prevent booms and bubbles from developing in the land, property and stock markets.

Read moreIs China Blowing Bubbles?