15 August 2008; economictimes.indiatimes.com: MUMBAI: A sharp rise in domestic inflation figures and a marginal increase in global crude prices severely dented sentiment in the local forex and bond markets on Thursday. While the rupee fell over 35 paise to breach the 43-per-dollar mark, bond prices dipped by more than 70 paise, reports Our Bureau in Mumbai.
Market participants were seen preparing for an extended weekend. The yield on the benchmark 10-year bond, the 8.24% bond which will mature in 2018, ended the day at 9.21% levels, rising from its previous close of 9.09%.
Market participants were anticipating price levels to be in the 12.40% region, which hit market sentiment during early trade. The rise in inflation has stoked further concerns of the central bank tightening its monetary policy. Higher-than-expected industrial output data released earlier this week had already, given rise to these concerns.
Also, dealers sought to cut their positions with a spate of holidays coming up. “Most dealers will be back only on Wednesday, and in volatile conditions like these, nobody wants to sit on large positions,” said a senior official with a bond house. Most dealers will be attending a forex-dealers conference in Macau over the weekend. With Tuesday also being a government holiday, market participation on Monday is also expected to be minimal.
Cash conditions continued to remain under strain, with banks collectively borrowing Rs 31,635 crore from the central bank over two repo auctions of its liquidity adjustment facility (LAF). Rates in the overnight call money market ended the day at 9%, after transactions worth Rs 14,714 crore were carried out. Rates in the market for collateralised borrowing and lending obligations (CBLO), where banks and other financial institutions borrow funds by placing surplus government bonds as collateral, ended the day at 9% after transactions worth Rs 21,331 crore were struck.
Record crude oil prices hit margins of Indian refineries
Thursday, 14 August 2008
15 August 2008; business-standard.com: Rakteem Katakey: New Delhi: Oil refineries in the country are likely to see their margins fall by over 70 per cent in the current quarter as they bought crude oil at record high prices but are now selling products at much lower rates. The lower margins are expected to push down the profit levels of the refiners by a minimum of 15 per cent in the second quarter ending September 2008, said an official with Bharat Petroleum Corporation, which operates two refineries on its own and holds the majority stake in a third refinery in Assam. Margins of the refineries are projected to fall to around $5 per barrel during the quarter from the record highs of over $16 per barrel in the quarter ended June 2008.
“If oil prices continue to fall then we could be staring down the barrel in this quarter,” said an official with MRPL, which imports the bulk of its crude oil from Iran.
The refinery companies import crude at a monthly average price. The companies paid very high prices for the oil they booked in July as oil prices in the last month were at record highs. The oil they booked in July will, however, arrive this month, when prices of petroleum products such as diesel have crashed by over 20 per cent from the record of over $160 per barrel in July. This results in a loss for the companies.
The refiners also hold around 10 days’ stocks of petroleum products, the value of which also falls when price of crude oil and petroleum products dipping, resulting in what is called a stock loss.
“The stock loss is expected to be quite high. All the gains of the first quarter could be wiped out in this quarter,” said S V Narasimhan, Finance Director of Indian Oil Corporation (IOC), which controls around 33 per cent of the country’s refining capacity.
The high projected stock loss is, however, not resulting in lower oil imports as demand for oil products in India grows at a rate of over 10 per cent and domestic oil production is not increasing.
The crude oil refiners reported record-high margins of over $16 per barrel in the first quarter ended June 2008. This was primarily due to the companies bought oil at cheaper rates and sold products at higher prices as oil prices soared during the quarter. The high margins helped IOC report profits during the quarter and drove up the bottom lines of Mangalore Refinery and Petrochemicals (MRPL) and Chennai Petroleum Corporation (CPCL) to all-time highs.
The value of the petroleum products that the refineries hold has also fallen along with the dip in global prices. Companies like IOC and MRPL hold around 10 days’ stock of oil products.
Sliding prices of oil are a positive for the marketing divisions of the oil companies as their under-realisation from fuel sales fall.
They are, however, a negative for the refineries as they book oil at high prices but sell at products at lower prices.
“Overall a situation of lower prices are better for us, as lesser under-realisation means we have more cash in hand, even though our refining margins fall,” said IOC’s Narasimhan. IOC controls over half of the oil product retail market along with a third of the country’s refining capacity.
The oil marketing companies sell petrol, diesel, kerosene and cooking gas as prices lower than its production costs. This results in under-realisations that put pressure on the cash flow of the companies, leading to high borrowings.
13 August 2008; economictimes.indiatimes.com: NEW YORK: Oil prices fell again on Tuesday, dampened by a stronger U.S. dollar and more evidence that developed countries such as the United States are cutting back on their energy use.
Light, sweet crude dipped by $1.44 to settle at $113.01 a barrel on the New York Mercantile Exchange, after falling as low as $112.31, a new three-month low. Oil is now nearly $35 below its July 11 record high of $147.27.
The International Energy Agency lowered its forecast on Tuesday for oil product demand from 30 developed countries, located mostly in Europe and North America, to 48.6 million barrels a day, down 1.3 percent from last year.
The Paris-based energy watchdog's report arrived a day after China said its crude imports in July, while historically strong, were down 7 percent from the same month last year.
The IEA cautioned that it is too early to determine whether the recent fall in oil prices is a longer-term trend. It said demand in developing countries could offset declines in developed nations, and that it sees Chinese oil demand continuing to grow at a robust pace.
And some economists have said that given the pullback in gasoline prices, demand could come back if motorists feel more comfortable with the cost of filling their gas tanks. The average U.S. retail gasoline price was $3.799 a gallon on Tuesday, according to auto club AAA, the Oil Price Information Service and Wright Express. That is down a penny from Monday, and down 31.5 cents from its July 17 record high.
But the energy markets — which have seen heavy liquidation from large speculative funds since crude hit its record high — continued to make the bet that energy use is on the wane.
"The market's still heavily focused on demand deterioration," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
A stronger dollar also weighed on oil prices. The euro traded at $1.4914, about the same as late Monday but at its lowest levels since February. The pound, meanwhile, fell to $1.8988, trading at its lowest levels since November 2006.
"Sometimes the cause and effect is difficult to define. It's a self-perpetuating, vicious circle going on, where oil falls, strengthens the dollar, then the strengthening dollar forces oil down more," Ritterbusch said.
Meanwhile, traders continued to watch the conflict between Russia and Georgia, trying to figure out whether Russia's push into the country will result in a serious oil supply disruption. Russia ordered a halt to military action in Georgia on Tuesday, but Georgia insisted that Russian forces were still bombing and shelling.
BP PLC said Tuesday it shut down the 90,000-barrel-a-day oil pipeline running from Baku on the Caspian Sea to Supsa on Georgia's Black Sea coast earlier. The London-based oil company emphasized, however, that the move was precautionary.
Another larger pipeline operated by BP in the former Soviet Republic is already out of action after a fire last week on its Turkish stretch. A third pipeline in Georgia that BP uses to export oil, but does not operate, remains open.
In other Nymex trading, heating oil fell 4.14 cents to $3.0781 a gallon, while gasoline futures slipped 2.34 cents to $2.8432 a gallon. Natural gas futures slid 1.9 cents to $8.33 per 1,000 cubic feet.
On London's ICE futures exchange, Brent crude for September fell $1.52 to $111.15 a barrel.
13 August 2008; timesofindia.indiatimes.com: NEW DELHI: Continuous hike in basic fares and fuel surcharge are taking toll on passenger traffic growth in the aviation sector.
The number of domestic fliers has fallen by 5 lakh from June to July as just 30.85 lakh people took to the skies last month. While passengers figures have been falling for past few months now, July was different on two counts - the number of domestic passengers was less than same period last year and most big airlines recorded their lowest ever load factors so far this year.
Though global crude is cooling off now, its record highs earlier have led to a huge rise in jet fuel prices. Coupled with over-capacity in skies, domestic airlines are feared to lose anywhere up to Rs 10,000 crore this fiscal. To avoid closure, they all raised fares and in the process lost passengers.
Since July to September is low season for travel, airlines are now waiting for next month as August is expected to be as bad as July. "If oil maintains its downward slide, jet fuel prices should fall. This would give some respite to airlines. But we will have to see how traffic picks up in peak season from next month and if numbers don't improve, fares will have to be looked at,'' said an airline CEO.
Aviation secretary Ashok Chawla will make a presentation before the cabinet secretary-headed panel appointed by the PM to look into airline industry'swoes.
"We'll present the entire scenario to the panel. The focus will be to try and get some immediate relief for the industry. There has been decline in traffic growth. The growth from January to July this year has been just 2 to 3%'' said Chawla.
In July, Simplifly Deccan saw its load factor dipping to 49.2% - less than even Air India (domestic)'s figure of 55.5% - as most of its metro operations have made way for Kingfisher flights on those routes for better revenue realization.
The neck-and-neck market share figures of Jet-JetLite and Kingfisher-Deccan combines saw the Naresh Goyal-owned airline getting a lead in July.
12 August 2008; economictimes.indiatimes.com: TRAVERSE CITY: US automaker Chrysler LLC is seeking manufacturing alliances with other automakers in the face of a steep downturn in US auto sales.
Chrysler has "the flexibility" to perform contract manufacturing and will continue to pursue such opportunities to "generate cash as a smaller company," Frank Ewasyshyn, Chrysler's executive vice president in charge of manufacturing, said at an industry forum in Traverse City, Michigan.
"We have looked at partners for a lot of things and we are going to continue to do that for the best business model," Ewasyshyn said. Sources said last month that Chrysler was in talks with Fiat SpA with the aim of leasing manufacturing capacity to the Italian automaker.
Chrysler has declined to comment on the talks with Fiat, which could open the way for the Italian automaker to re-enter the U.S. market. Chrysler also has an agreement to build a truck for Japan's Nissan Motor Co Ltd, which will build a small car for Chrysler.
Ewasyshyn said although the automaker's current plan is to build the Nissan-designed truck at Chrysler's plant in Saltillo, Mexico, Chrysler has the capacity to build it at other plants as well. Chrysler also has the flexibility to add more car-based platforms to its facilities including the Sterling Heights, Michigan plant which builds the Dodge Avenger and the Chrysler Sebring sedans, Ewasyshyn told Reuters on the sidelines of the forum.
"The Sterling Heights plant is set up to be very flexible and can accommodate three to four platforms. In fact we can do a car-based platform at several locations," he said. Chrysler, the No. 3 U.S.-based automaker, which is controlled by private equity firm Cerberus Capital Management LP, is looking to raise cash as it faces scrutiny over its liquidity because of the sharp decline in truck sales.
Chrysler total vehicle sales are down 23 percent through the first seven months of the year. Chrysler has been hit harder than rivals by a consumer defection from trucks and SUVs because light trucks represent 70 percent of its sales.
Moody's Ratings downgraded Chrysler last week, citing competitive and financial pressures, while Fitch Ratings downgraded Chrysler last month, warning that the automaker could run below the "minimum required levels" of cash to finance operations by the second half of 2009 if industrywide sales remain flat or worsen. Meanwhile, Automotive News quoted Ewasyshyn as saying that Chrysler is negotiations with the United Auto Workers to put factory workers on four 10-hour work days instead of five, eight-hour work days in a bid to cut costs.
12 August 2008; business-standard.com; New Delhi; Sales of Honda Civic Hybrid, the country's first hybrid car launched in June this year, have surpassed the company's expectations. Since July, when the hybrid vehicle went for sale, Honda Siel has sold about 50 hybrid cars in the country, mostly to dealers of Honda cars and a small proportion to high networth individuals.
"We find the retail customers of Civic Hybrid to be well travelled and techno-savvy. Also, their decision to buy Civic Hybrid stems from a need to save the environment through better fuel consumption," said Jnaneswar Sen, senior general manager (marketing), Honda Siel.
However, the encouraging sales of Civic Hybrid, the most expensive mid-size sedan costing an extra Rs 10 lakh over the petrol version of Civic, have not made the company revise its initial sales target upwards. At the launch of Civic Hyrbrid, the company said it hoped to sell about 200 units of the green car.
Imported from Japan as a completely built unit (CBU), the car attracts a customs duty of 104 per cent (the 10 per cent excise duty cut spelt in this year's Union Budget has been factored in) and is priced at Rs 21.5 lakh (ex-showroom Delhi). Civic Hybrid is 47 per cent more efficient. It means, on an average, it gives an extra 5-7 km over and above the 10 km logged by the petrol version of Civic.
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