Link to Wall Street Journal Video

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Steel prices keep falling in China since April

I came across the interesting article on steel prices in China. Looks like there is a bloodbath out there and the view are contrary to comments made by Tata Steel
available here.

UPDATED: 17:16, June 23, 2005
Steel prices keep falling in China since April

China Iron & Steel Association found in its survey recently that prices of steel products had kept sagging since April this year in China. Some products are priced about 1,000 yuan lower per ton on average than in the first quarter. Some have plunged by 20 percent. This means Chinese steel products are much cheaper than those on the foreign markets.

The Association asked steel makers to pay more attention to the adjustment of their lines than on scale and output, so as to prevent sharp fluctuation of steel prices.

At present, prices of long products, reinforced steel and steel rods in particular, have even plummeted below the average production costs of the whole sector.

By People's Daily Online
http://english.people.com.cn//200506/23/eng20050623_191967.html

why cheer the Reliance settlement??

I am perplexed by the way everyone from the finance minister to the lay investor on the street is cheering the Reliance settlement. Nobody has stopped to ask at what cost is it to the non-promoter shareholders.

The board of Reliance seems to exist just to execute the promoters thoughts, which is indeed very sad when you realise that Reliance is India largest private sector company.

There are tremendous synergies between Reliance and Reliance Energy. Public Sector petroleum players desperately want get to the energy sector and Reliance wants to give up that area!

In the short term, the market is cheering the settlement - In the long term things could be different.

Meanwhile, i am reminded of an old friends question.

Who would you prefer to employ. An honest person with a medium level of effeciency or an dishonest but highly effiecient person, who even after skimming something off, will still give you a better output.

The market, without doubt, seems to prefer the second. But i think a better option is to search for the honest and highly effecient person!

To expect more from the media though is futile!

"To expect more from the media though is futile. No one would cross a major advertiser, not even if it affects the lives of hundreds of thousands. We had to wait for the Ambanis to spill the beans on the Ambanis. Maybe the Roys will one day be as obliging."

This article in the Telegraph raises many relevant issues on which i dont want to comment further but i believe it is a must read

metal prices - a 25% fall

this table from Indiainfoline,
shows have steel price have reacted from March. I expect another 20% decline.

Metals melt as prices, demand fall 6/13/2005 6:14:50 PM IST - Indiainfoline

"it’s amazing how fortunes change in the stock market. Last year and early this year, metal shares were the toast of the town as international prices shot through the roof even as demand, both local as well as overseas, remained robust. However, things have turned sour for them since the middle of March and many of them have lost quite a lot of shin. Among the major losers have been Tata Steel, SAIL, NALCO, Jindal Steel, Essar Steel, etc have lost significantly in the last three months.

Index	15-Mar-05	13-Jun-05	% Change
Metal	6977	5279	-24.3
Index	6752	6833	1.2

"

Atmosphere in a small broker's back office

A friend of mine described to me a scene at a small brokers back office in a mid sized city.
"There were two computers and about ten people stood behind each of them to complete their chores. The room was small, and the air conditioning had become ineffecitive. The stench of sweat was overpowering and i could just stand there to complete the formalities - I ran out".

I wonder what stage of the bull market it is!

A balanced copy on Sahara

The FT copy available here does a great job in explaining the happening at the Sahara group and the "Systemic risk" it poses.

Sahara India TV footage

I haven't seen the TV clip of the Sahara chief birthday bash. Some news stories about it quote him as "disease free" - a tag more often used for animals. May be he can try to convience people about his physical health with such stage managed events, but it is the health of business that everyone should be worried about.

I remember reading a long time ago that the Reserve Bank of India
had classified the Sahara group, as an entitity capable of causing minor disruption in the financial system. They are into mutiual funds and have got a life insurance biz. license too.

Some Random Thoughts

Put up a new blog where i plan to pen some thoughts.

An outlandish prediction - on Sahara

Almost every major bull market in India has ended due to a scam. I wonder why this run should be any different.

Will Sahara pull the market down this time? surely, something is wrong with the Sahara group which has millions in public deposits. Nobody knows anything about the group - how it raised funds, who are the people behind it. They spend money like water and expand in ways that legitimate money can never does.

The group chairman, who loves the media attention, has not been seen i public for 3 months.
( I havent read the cover story in a news magazine about it). He is expected to appear in public on June 10. The company says he is only suffering from mild blood pressure but i guess he needs more than a Hepril.

Now, let me paint a doomsday scenario. Major industrial groups could have exposure to the company. Reliance is clearly a suspect. banks may have funded it. If the public dont get their money back, there will riots in north india cities - atleast lucknow. Politicians may be forced to take some populist decions - like get a bank to bail out these deposits.

Afterall, the group claims 1 in 17 Indians have a deposit in the group - surely a major vote bank - atleast in the northern states.

This will have a cascading effect on the financial system and there is no need to guess where the market will go.

I fervently hope what i write does not happen. we will know shortly.

The sensex prediction - not so right.

"This, i believe, means that the market will take a final heave before a significant fall." - Feb 23, 2005.

the market was aroung 6600 feb end. it did move up to 6800 and then fall to 6000 levels and now has risen to 6800. but i was referring to a far deeper correction. a loss of 20% from 6600 levels. i still believe that the market will shave off 20% from curren levels of 6800 - how soon will it happen, is the unpredictable factor.

bang on target on steel prices

"I wonder what this will do to commodity prices like steel, coal, which are at alltime highs. Some rapid cooling off of prices should be in the offing and these stocks should follow suit." - March 5, 2005 post.

Indeed, steel has had a rapid cooling off and i dont follow coal prices. Steel baron Lashmi Mittal has lost 35% of his wealth. I wanted to see the decline in steel prices and how the BSE metal index has moved during the period, but then though will give it a pass. It would be fair to assume that steel prices have declined by 10-15% and the index 20%

Taking Stock

It has been nearly 4 months since my last post. In the market the abilility to "do nothing" is a virtue and i guess it got transferred to my blog! I have made some predictions on the metal prices and the market levels it is time to see how i have fared.