Tyre stocks rally since Modi deal, may not sustain
26 April 2011;business-standard.com:Mehul Shah:Mumbai: Shares of Indian tyre companies have gained by three to 13 per cent after German tyremaker Continental AG agreed to buy Modi Rubber’s unit last week. Since the Continental-Modi Tyres deal last Monday for an undisclosed amount, shares of Modi Rubber have rallied nearly 20 per cent. Other tyre stocks like MRF (up 12.1 per cent), Apollo Tyres (up 7.3 per cent), Balkrishna Industries (up 4.55 per cent), JK Tyre & Industries (up 3.1 per cent) and Ceat (up 3.3 per cent) have all gained since then. However, market experts are not impressed. “Whenever some deal happens, shares of other companies in the same sector are also going up. This has been the trend in the market in the recent past,” said S P Tulsian, an independent investment advisor. “The upmove in tyre stocks post the Continental-Modi Tyres deal is irrational and not sustainable,” he added. In the case of tyre companies, the outlook for the sector is not rosy. “There will be some pressure on margins of tyre companies in the next two-three quarters due to high natural rubber prices,” said Ashwin Patil, analyst at LKP Securities. “However, current rubber prices which are ruling at Rs 230-240 a kg are not sustainable and should come down to around Rs 180-200 a kg by that time.” Prices of natural rubber, which comprise a little over 40 per cent of raw material cost in tyre manufacturing, have increased 16 per cent in this year so far. Over the next 12-15 months, rating agency Icra expects the profitability of tyre manufacturers to be affected by the expected supply gap for rubber, despite robust demand for tyres. Domestic tyre manufactures are also facing the threat of increasing penetration of Chinese imports into the Indian truck and bus radial tyre segment.
25 April 2011;deccanherald.com:New Delhi: State-owned Indian Oil Corp, the nation's largest oil firm, today hinted at an imminent hike in petrol prices, whose rates have not been revised since January in view of elections in states like West Bengal. "We would do it (increase rate) at the earliest possible," IOC Chairman Ranbir Singh Butola told reporters here. In his first interaction with media after taking over as the Chairman of the nation's largest fuel marketing firm, Butola said IOC and other state firms had consciously decided not to revise rates of petrol to keep "the environment happy". The government had in June last year freed petrol pricing from its control and state-run firms had on as many as seven occasions changed rates in line with international prices before deciding in the second half of January to freeze rates. "We live in an environment (comprising of the people and the government). If we take certain action, the environment is going to turn against us," he said. IOC is losing a tad less than Rs 7 per litre on petrol currently. After including the local sales tax or VAT, the desired increase in price comes to about Rs 7.50 a litre in Delhi. "In our consideration, we decided to take these losses for sometime," Butola said. Asked if the petrol price will be revised soon after assembly elections are completed on May 10, he said a review "will take place soon." He, however, deflected questions on state firms acting at the behest of the government in not revising petrol prices. IOC was losing Rs 297 crore per day on selling diesel, domestic LPG and kerosene at government-controlled rates, he said. "We are losing Rs 18.11 per litre on diesel, Rs 28.33 a litre on kerosene and Rs 315.86 per 14.2-kg domestic LPG cylinder," he said. The company, whose debt is growing at Rs 5,000-6,000 crore every month on unchanged fuel prices, expects government to compensate it for the losses.
24 April 2011;business-standard.com:Sharmistha Mukherjee & Swaraj Baggonkar:New Delhi/Mumbai: As uncertainties persist over sourcing of automotive components from Japan in the wake of last month’s earthquake and tsunami, Japanese automaker Toyota has cut production in India while compatriots Honda and Nissan may have to follow suit. Nissan is still a minor player in the country but Honda, with 2.36 per cent share of the Indian market, is very strong in sedans with its City leading the mid-size segment. Toyota’s Corolla Altis is strong in a segment slightly bigger than City. Its new baby, Etios, which costs half as much as Corolla, is making waves with waiting periods of up to four months, which indicate incremental demand. With its bigger sedan Camry and utility vehicle Innova, the company has 3.34 per cent share of the market. Not surprisingly, rival Maruti Suzuki is talking about a rise in demand for its cars, especially SX4, the sedan. Although headquartered in Japan, Maruti is nearly independent in its India operations with high localisation. American Ford Motor, too, whose Fiesta is a force to reckon with among sedans, has similar sentiments. “There has been a sharp spurt in demand in the last few days (for SX4). We expect further increase in demand from here,” said Shashank Srivastava, chief general manager (marketing) with Maruti Suzuki. Another senior Maruti executive said the company was not facing any constraint in supplies but was closely monitoring the developments in Japan. It might look at sourcing parts from Germany and Thailand. Ford India executive director (marketing, sales and service) Nigel Wark, stating that it would take a few days to assess any shift in consumer behaviour, said: “We have received a very good response to our sedans over the past few days.” Toyota Kirloskar Motor on Friday announced a 70 per cent cut in production at its two facilities in Bidadi, Karnataka, till June. This may get prolonged as the message coming out of its Japan office on Friday was that the company will not return to pre-disaster production level until the end of the this year. The local content in Toyota Etios is 70 per cent and critical components like engine and transmission are imported. Honda Jazz, City and Civic have localisation levels ranging from 74 to 77 per cent while Accord’s is a mere 28 per cent. Nissan Micra has 85 per cent local content. Honda City, for which one has to wait a couple of weeks now, may take up to two months to get delivered. "That there is an impact on (auto component) supplies is a given, we will have to adjust our production accordingly," said Jnaneswar Sen, vice-president (marketing), Honda Siel Cars India. A spokesperson for Nissan's India venture insisted that operations at Chennai had not been affected, but a vendor who supplies parts to Nissan said the company was facing a crunch and the waiting period for the small car Micra had increased. The Micra diesel now has a waiting period of a month. "Japan is an integral part of the supply chain for the automobile industry globally," said Srivats Ram, president, Auto Components Manufacturers Association. According to data available with the industry body, components worth more than $10 billion were imported from Japan last financial year.
Maruti to shift 3 lakh units production to Manesar from Gurgaon
24 April 2011;deccanherald.com:New Delhi: The country's largest car maker Maruti Suzuki India is planning to shift production of about three lakh vehicles from Gurgaon to decongest the old plant as soon as the two new units at its Manesar facility come up. The Gurgaon facility that has three units, currently produces nearly 9.5 lakh units per annum. Once the vehicle output is trimmed at the facility to 6-6.5 lakh units, the company aims to utilise the idle space and workforce to produce more engines and other parts there. "The Gurgaon facility is very congested and old. We need to reduce some production there. The plan is to reduce the output to 6-6.5 lakh units annually," Maruti Suzuki India (MSI) Chairman R C Bhargava told PTI. The company had rolled out nearly 9.5 lakh units from Gurgaon in 2010-11 out of a total installed capacity of 8.5 lakh units at three plants in the complex, spread over 300 acres of land. It produces models like Swift, M800, Omni, WagonR, Ritz, Alto, Eeco and Gypsy there. "We will shift the excess production to Manesar from Gurgaon... From the two new upcoming plants in Manesar that will have a total installed capacity of 5 lakh units, we should be able to do 7 lakh units," Bhargava said. At present MSI is setting up two new units inside its Manesar facility at a total investment of Rs 3,625 crore. The existing plant there produced about 3.5 lakh units in 2010-11. The two new plants in Manesar will have a capacity of 2.5 lakh units annually each. The company is aiming to open the second unit by September-October this year, while the third one is scheduled to be operational in 2012-13. On by when the company will start trimming its production in Gurgaon, Bhargava said: "We would like to do it as soon as we can do. It will depend on creation of new capacity and market demand." Besides vehicles, the Gurgaon facility also produces engines, manufacturing about 7 lakh units per year of the K-Series engines and about 4.5 lakh units per year of F, G and M-Series engines. Elaborating on how the company plans to utilise the idle space post-decongestioning Gurgaon, Bhargava said: "It will be mainly used for parts production. We will produce more engines and will ramp up the capacity." When asked by how much the engine capacity will be increased, he said: "We have not decided it yet, but it will obviously be matched with the level of car production." Besides Gurgaon, a separate entity -- Suzuki Powertrain India Ltd -- produces diesel engines at the Manesar facility. It has a capacity to roll out 3 lakh units per annum. MSI is also considering to set up its 7th plant, over and above the two upcoming units in Manesar, as it aims to sell up to 30 lakh units every year by 2015-16. The company's present overall vehicle capacity is 12 lakh units per year. Once the two new units at Manesar become operational by 2012-13, its total production capacity will go up to 17 lakh units annually. In 2010-11, the company's sales soared 24.81 per cent to 12,71,005 units from 10,18,365 units in the previous fiscal. Domestic sales increased by 30.08 per cent to 11,32,739 units from 8,70,790 units in the previous fiscal. MSI's passenger car sales during last fiscal jumped by 26.24 per cent at 9,66,447 units from 7,65,533 units in FY'10. However, its market share in this segment fell to 48.74 per cent from 50.09 per cent in 2009-10. Besides the fresh investments at Manesar, MSI is investing Rs 2,500 crore for its K-Series engine plant and setting up a dedicated R&D facility at Rohtak. Earlier, the company had announced to hire at least 2,300 people, mainly for its upcoming two new plants in Manesar, within next two years. At present, MSI, which is 54.2 per cent owned by Suzuki Motor Corp employs 8,617 people as on March 31, 2011.
23 April 2011;economictimes.indiatimes.com:NEW YORK: Those who think gasoline and food prices are high now should brace themselves for what is coming, a leading commodities strategist warns. "People may be surprised at how high prices can go," predicts Colin Fenton, the head of commodities research at JP Morgan in New York. Fenton, in Denver this week to talk to clients, said inflation is well under way in everyday items consumers buy, even if the consumer price index reports a modest 2.2% rate. As an example, he points to the little bag of chips that are a staple of sack lunches and sandwich shops. From November 2001 to August 2007, they were stable in price, rising only a penny to 34 cents. They now cost 45 cents, with a 6% jump the past 12 months. Gasoline prices are where consumers probably notice commodity volatility the most. But people need to fill their tanks to get to work, he said. Consumers may reduce their downloads from iTunes, the number of lattes they drink or cut their cable viewing, Fenton predicts, but they will keep buying gasoline. Last August, Fenton and his team turned bullish on commodities, and in January they issued a prescient warning that commodity markets had become too complacent about risk. While he couldn't have predicted the specific events that would push volatility higher -- uprisings in the Middle East and a massive earthquake in Japan -- Fenton's forecast soon panned out. Rising food prices contributed to revolts in the Middle East, which have contributed to higher oil prices, which in turn has pushed food prices even higher. Most revolts have occurred in countries where food purchases consume 35% or more of household budgets. Other countries most vulnerable to food inflation include Pakistan, India, Indonesia, Nigeria and the Philippines. But the real force of higher commodity demand comes from growth in emerging economies, especially China, which is hungry for fuel. Although US consumers may grumble, the Chinese government is in a much stronger position financially to absorb price hikes. Fenton predicts oil will hover around $180 a barrel by 2016. But not everyone is convinced that the strong demand out of China is sustainable. "The hard landing suggested by weakening Chinese stocks would no doubt burst the global commodity bubble, including agricultural product prices," predicts leading deflationist A. Gary Shilling. A reversal in China would hit other emerging markets dependent on commodity exports, dampening demand globally. But Fenton, who recently visited China, said that the country's economy looks solid and demand for transportation fuel remains high.
23 April 2011;business-standard.com:Jyoti Mukul & Sudheer Pal Singh:New Delhi: The Central Electricity Authority (CEA) has suggested that Coal India Ltd (CIL) be made the nodal agency for pooling of coal prices besides being made the canalising agency for import of coal. The proposal, though has found few takers in the coal ministry. Coal is currently freely imported into the country by power projects mainly through an intermediary trading company which also arranges for transportation. “It will be simpler (for introduction of pool pricing mechanism) if all imports to meet the shortfall in the availability of domestic coal be made by domestic public sector company like CIL,” CEA said in its recommendations on the pooling mechanism for domestic and imported coal. A senior CIL executive told Business Standard that the company does not want to import coal for other companies, a condition which has also been imposed by the New Coal Distribution Policy. “According to the policy, CIL and Singareni are required to meet the country’s coal demand even through imports. We did not want this but it was thrust on us. It is a policy in which one company is asked to meet the country’s entire coal demand even if it has to be met through imports,” he said. Questioning the feasibility of pooling coal prices, coal minister Sriprakash Jaiswal told Business Standard that pooling was feasible only if one company imports coal. “Pooling is a proposal but no decision has been taken so far on this. Import of coal is under open general licence (OGL). As of now, there is no use talking about pooling because CIL is not the only one importing,” he said. The Union minister said private companies could go ahead and import coal at any cost. It has also proposed a pooled price formula based on the average price of imported coal, after transportation and insurance charges, and the coal produced by CIL and Singareni Collieries Company Ltd (SCCL). While drawing up the formula, the technical regulator for the power sector also said captive coal should be kept out of the mechanism for arriving at the pooled price. Around 87 coal blocks have been allocated to independent power producers and states for captive coal mining in power sector. It is difficult to price this coal since there was no bidding for distribution of the mining rights. Besides, as CEA pointed out, the pooling of captive coal will create problems for these projects since they have power purchase agreements signed with utilities through bidding on tariffs arrived on the basis of captive coal blocks. NTPC Ltd, the biggest coal consumer in the country with an annual requirement of more than 150 million tonnes, is also not keen on the pooling proposal. The average cost of NTPC coal will go up since around 85-90 per cent of its consumption is met through domestic coal. “We are already pooling coal at our power plants so at the company level our cost is pooled,” said a senior NTPC executive.
Petrolstop is a division of Car Fuel Info Solutions, LLC Petrolstop.com is a registered trademark owned by Car Fuel info Solutions, LLC Website Design by Onazari Technical Solutions
