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INTERNATIONAL

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

COMMODITY EXCHANGES
Exchange 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 EXCHANGES
Name Of Exchange
New York Mercantile Exchange
(NYMEX)
Chicago Board of Trade (CBOT)
London Metals Exchange (LME)
Chicago Board Option Exchange
(CBOE)
Tokyo Commodity Exchange (TCE)
Malaysian Derivatives Exchange
(MDEX)
Commodities Exchange (COMEX)
Multi Commodity Exchange (MCX)
National Commodity & Derivative
Exchange(NCDEX)

Major Commodities traded in


exchange
Crude Oil, Heating Oil
Soy Oil, Soy Beans, Corn
Aluminium, Copper, Tin, Lead,
Zinc, Nickel
Options on Energy, Interest rate
Silver, Gold, Crude oil, Rubber
Rubber, Soy Oil, Crude Palm Oil
Gold, Silver, Platinum, Copper
Gold, Silver, Crude Oil, Mentha, Soy
Oil, CPO, Copper, Zinc, Lead
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

Contd
Trading platform of CBOT
The pit

Open-outcry trading
Trades 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 trading

Electronic 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

Contd
MCX has been certified to three ISO standards
ISO 9001:2008 quality management standard
ISO 27001:2005 information security management standard
ISO 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

Contd
Globally, 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 OIL
One 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 OIL


West Texas Intermediate
Brent Crude
Dubai Crude
Russian Export Blend

Contd
Exports 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

Nearly 80% of crude oil consumption is imported by India


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

ONGC
Indias 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

Contd
ONGC 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 COMMODITIES
Cereals-Wheat
Plantation-Rubber
Oils and seeds-Crude Palm oil
Fiber-Kapas
Spices-Cardamom
Other - Almonds

WHEAT
Combined 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.

RUBBER
Thailand, 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 OIL


Palm 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.

KAPAS
The 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.

CARDAMOM
Cardamom 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

ALMONDS
Annual 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 MARKETS


Second 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 COUNCIL


Market 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 FIXING


Market Making Process
Current participants in the fixing:
Barclays
HSBC
Scotai- 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 FIXING


Initiation
Internal Process
Iteration
Fixing

GOLD PRICE FIXING PROCESS FLAWS &


FALLOUTS
Flaws of the process
Barclays Fixing Saga
Future

SILVER PRICING MECHANISM


Historically , priced like gold , participants being:
Deutsche Bank
HSBC
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 UNDERTAKEN
INDIA'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

MINERALS
MMTCs 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.

Contd
Customers have the following options for purchase:
High Seas basis
Ex-godown basis
Ex-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 METALS
MMTC 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 Loan
Outright Basis
On Replenishment Basis

CARBON TRADING
Kyoto protocol
Under UNFCCC
Adopted by parties to the UNFCCC in 1997
Entered into force in 2005
Agreement for the protocol to be followed in two

commitment periods (2008-12 and 2013-2020)

Contd
Objectives of Kyoto protocol
Commitment to move away from fossil fuel energy sources

(oil, gas and coal) to renewable sources of energy viz.


hydro, wind, solar power
Commitment to reduce greenhouse gas emissions
Targets 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 TRADING


Carbon CAP-TRADE program
CAP : 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 dioxide

TRADE : the transfer or trade of allowances


Excess 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.

Contd
Carbon offsetting
Offset 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


MECHANISMS
Emission 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

Contd
Clean 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.

Contd
Joint 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 TRADING


Reduction 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
TRADING
Right to pollute
Slow process
No effective carbon reduction in the atmosphere

THANK YOU

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