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Commodities Briefing 20.Aug 2008

US emissions market set for huge growth
Global demand for commodities lifts U.S. exports
Commodities still positive
Markets tumble as Rogoff warns worst of credit crisis still to come
Gulf unlikely to revalue currencies before union
The beginners' guide to the UK's carbon trading schemes
Indian regulator seeks details on R-Money-NMCE deal
Gold mining stocks GDX ETF decline incomplete
Fund manager to pay $291-million in penalties
Paper gold trades at a premium
Origin Energy enumerates seven reasons to reject BG Group's $13.8bn bid
Commodity carnage: Where to turn next?
Fixing high oil prices
Nasdaq OMX takes a rest after string of mergers
'Speculator' in oil market is key player in real sector
Bill Clinton: U.S. energy independence would ‘Rock the World’
Australian dollar rises as commodities gain; N.Z. dollar climbs
Xstrata digs deep as falling nickel prices force mine closure
Platinum price to reach new highs over next quarters
Commodity hedge funds 'Ending In Tears'
Dubai to host meet on commodity development
Private banks eye stake in commodity bourse of Indiabulls
AIM filled with M&A opportunities for gold companies
Dollar falls against major currencies
Oil up slightly in Asia ahead of inventory report
Commodity bear pit mayhem
Falling prices indicate inflation may be peaking
Canada: Industrial metals rally
Aluminum: Is Trinidad and Tobago too late?
Asia markets struggle but Shanghai soars
Base metals: Comex copper rises with other commodities
Sri Lanka says easing commodity prices 'moderating' inflation
Tumbling commodity prices send Indonesian stock market into turmoil
High commodity prices save the day for exports

Posted on 20 August 2008 by VRS |  Email |Print

From Financial News: The US market for carbon trading is likely to grow to three times the size of its European equivalent, which accounts for more than 99% of the global total, according to the head of a company operating carbon markets in both regions. Neil Eckert, chief executive of London-based Climate Exchange, said: “We are convinced the US will introduce a mandatory carbon emissions system after the next election and that the US carbon market will grow to three times the size of that in Europe.”

Climate Exchange operates the European Climate Exchange, which trades compliance permits under the European Union’s Emissions Trading Scheme, and the Chicago Climate Exchange, which trades unregulated voluntary emissions reduction credits….. Full Article: Source

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From IHT: Exports are the bright spot this year in an otherwise bleak U.S. economy. But the world is not suddenly snapping up a lot more made-in-America goods like aircraft, machinery and pharmaceuticals. The greater attraction is decidedly low-luster commodities like corn, wheat, ore and industrial raw materials. While the rise in commodity prices is a welcome relief, however, it is an unreliable prop for an industrial power like the United States, which still, despite China’s rise, remains the biggest producer of goods in the world.

“The historical data tell us clearly: Don’t get too used to commodity export booms,” said L.Josh Bivens, a trade expert at the labor-oriented Economic Policy Institute. “As any third world country will tell you, they tend to go away pretty quickly.”…. Full Article: Source

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From Resourceinvestor.com: Long-term supply and demand fundamentals remained positive for commodities, and global resources group BHP Billiton would continue to make investment decisions on new projects, CEO Marius Kloppers said. He was addressing a media teleconference on the group’s year-end results after a week of sharp falls in base and precious metals prices, including a more than $70/oz drop in gold to a low of $773/oz as the oil price softened.

Metals prices firmed slightly yesterday on a stronger oil price and weaker dollar, which allowed the rand to strengthen to R7.70 in midafternoon trading, its strongest level in a week. Bullion firmed to $797.50/oz, up from $796.25, but crude dropped slightly in later trade as tropical storm Fay approached Florida….. Full Article: Source

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From Independent.co.uk: Renewed fears about the length and severity of the financial crisis sent shivers through markets yesterday after an influential economist predicted a big American bank failure and said the worst was yet to come. Kenneth Rogoff, the former chief economist at the International Monetary Fund, warned that the financial sector was probably only halfway through the year-old crisis.

“We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper. We’re going to see a big one, one of the big investment banks or big banks,” Mr Rogoff, who is now an economics professor at Harvard University, told a conference in Singapore. “We have to see more consolidation in the financial sector before this is over.”…. Full Article: Source

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From Zawya.comOil producers in the Gulf are unlikely to revalue their currencies against the US dollar before they launch their landmark monetary union andecide on the common currency unit for that scheme, experts said. Although the dollar’s recovery over the past few weeks could weaken speculation about an appreciation of the GCC currencies, economists said the increase would not affect any revaluation plans.

“An appreciation of the GCC currencies has nothing to do now with the recovery or the decline in the US dollar as such plans have become closely linked to the common currency under discussion,” Mohammed Al Asumi, a Gulf economist, told Emirates Business.

“Any currency changes in the GCC are now associated more with the monetary policy than the dollar movements. I don’t expect any major changes in the existing currencies before the creation of the monetary union. As for the common currency, my feeling is that it will likely be pegged to a basket of currencies, in which the US dollar will be the main component.”…. Full Article: Source

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From Businessgreen.com: Emissions trading is widely touted as one of the best mechanisms for tackling climate change, but how do these schemes work and how will your business be affected? Tom Young investigates three of the emissions trading schemes having an impact on UK firms. Over the past three years carbon trading has emerged as one of the most important weapons in the fight against climate change, with politicians and business leaders of all stripes singing its praises.

The principle behind the idea is simple: make firms pay for their carbon emissions and they will, for the first time ever, have a financial incentive to cut carbon emissions….. Full Article: Source

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From Business-standard.com: Commodity regulator Forward Markets Commission (FMC) has sought details from National Multi Commodity Exchange (NMCE) on Reliance Money’s proposal to acquire 26 per cent stake. The regulator has also asked for information on the action taken to avoid a potential conflict of interest with Reliance Anil Dhirubhai Ambani Group’s other commodity ventures. The regulator has also turned down the move to appoint Reliance Money director & CEO Sudip Bandyopadhyay as an independent director on the exchange’s board.

Sources close to the development said FMC has sought details from NMCE as it did not find the documents in order and has asked the exchange to furnish details of the deal size and other issues….. Full Article: Source

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From Marketoracle.co.uk: Despite the 40% decline in the Market Vectors Gold Mining ETF since March, the gold miners ETF does not exhibit the pattern of completion and likely still will hit one or both of my optimal lower targets derived off of the massive top formation we see on the enclosed daily chart. Let’s expect a bounce from the vicinity of 33.50, but thereafter another loop to lower lows into the 30.00-28.00 area to complete the Jul-Aug decline.

Mike Paulenoff is author of the MPTrader.com , a real-time diary of Mike Paulenoff’s trading ideas and technical chart analysis of Exchange Traded Funds (ETFs) that track equity indices, metals, energy commodities, currencies, Treasuries, and other markets. It is for traders with a 3-30 day time horizon, who use the service for guidance on both specific trades as well as general market direction…. Full Article: Source

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From Globeinvestor.com: Ontario-based hedge fund manager Paul Eustace has been ordered by U.S. authorities to pay more than $279-million (U.S.) in restitution, plus a $12-million fine, after the Commodity Futures Trading Commission accused him of defrauding investors in commodity funds. A Pennsylvania court has also imposed a permanent trading ban on Philadelphia Alternative Asset Management Co., which Mr. Eustace controlled, and required restitution of about $276-million and a fine of $8.8-million from the hedge fund firm.

“This concludes a successful effort by our Division of Enforcement to stop fraud in its tracks, return as much money as possible to defrauded investors, and to bring wrongdoers to justice,” CFTC acting chairman Walter Lukken said in a press release….. Full Article: Source

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From Indiatimes.com: Gold exchange-traded funds (ETFs) are feeling the pinch due to the shortage in physical supply of the bullion. Gold ETFs are open-ended mutual fund schemes that are backed by units of physical gold (0.995 purity). The recent drop in gold price has led to a flurry of demand, which bullion banks were unprepared for. This has caused a shortage in supply.

As a result, the demand for paper gold has risen and ETFs are trading at a premium of between 35% and 5% to the spot price of gold in the last few weeks….. Full Article: Source

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From theage.com.au: ORIGIN Energy managing director Grant King believes there are seven strong reasons for rejecting BG Group’s $13.8 billion takeover bid. In sum, though, he still believes the $15.50-a-share offer from BG undervalues his company. In releasing the 100-page Target’s Statement advising Origin shareholders to reject the offer, Mr King said an independent expert’s report by Grant Samuel & Associates would be released to shareholders a least a week before the BG offer lapses on September 26.

It will provide shareholders with a valuation range for Origin shares….. Full Article: Source

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From Seekingalpha.com: There’s nobody like an investment banker to deliver yesterday’s news tomorrow, and charge you dearly for it. Goldman Sachs has turned bullish on the dollar, while Merrill Lynch is calling crude oil down to $80.If bandwagon jumping was an Olympic sport, these guys would have more gold medals than Michael Phelps. After pumping up the commodity and Euro bubbles all year, a whiff of a bear market and they shamelessly perform a high speed U-turn.

Even more amusing is the sudden discovery by the CFTC, which bent over backwards to convince Congress that oil prices were set by fundamentals, that it underestimated the share of trading accounted for by financial speculators….. Full Article: Source

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From Commodities-now.com: High oil prices can be remedied by conservation, exploration and innovation. Not one of these options is without fault but each is necessary: The United States is increasing its dependence on foreign oil and all this at a time when its own production is down sharply for the previous two decades by 40%.

To battle those elements, the big oil companies along with private developers are working on a series of technologies that turn coal into liquids. The idea is to take an abundant resource such as coal and gasify it — a process that cleanses it of its impurities. That byproduct can then supplement the use of crude oil, which would lessen the country’s dependence on foreign oil supplies and help ease prices. In fact, developers of the technology say that a barrel of coal-to-liquids is about $50 compared to a barrel of crude oil that now stands at roughly $120 a barrel….. Full Article: Source

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From WSJ: Nasdaq OMX Group Inc. is taking a breather as the trans-Atlantic exchange operator digests three acquisitions that have transformed its business profile. The pause on the merger-and-acquisition trail — dominated for two years by its aborted pursuit of London Stock Exchange Group PLC - comes after Nasdaq’s purchase of OMX AB, the Swedish exchange and technology group.

The OMX deal, completed in February, was followed by the recently closed purchase of the Philadelphia Stock Exchange, a pending acquisition of the Boston Options Exchange and a new European share-trading platform slated for next month….. Full Article: Source

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From WSJ: When U.S. futures regulators recently reclassified one of the largest traders in the oil market as a speculator, they didn’t identify the firm. But people familiar with the matter now say the company whose activities helped change perceptions about the escalating pace of oil speculation is Vitol Group, a large commodity-trading company with headquarters in Europe.

Though less well-known in the U.S., the company is one of the biggest players in the oil market, linking buyers and sellers of physical crude oil and refined products. It has interests in storage terminals and oil exploration around the world and sold a large refinery in Canada in 2006….. Full Article: Source

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From Foxnews.com: Former President Bill Clinton said Monday the U.S. would “rock the world” if it paved the way for an energy independent state, territory or nation. Clinton told an energy summit in Las Vegas it’s imperative “to convince people this can be done,” arguing that it’s to America’s economic benefit to see it happen.

Clinton said Puerto Rico would be a good place to start, since it imports most of its power at a high cost to residents. He also rattled off several foreign nations that have low power demand and are sunny and windy….. Full Article: Source

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From Bloomberg.com: The Australian dollar rose from near the lowest in more than six months as prices of commodities increased, bolstering the outlook for the nation’s export earnings. The New Zealand dollar strengthened. Australia’s currency climbed on speculation its 10.1 percent drop over the past month was too rapid after the Reuters/Jeffries CRB Index of 19 raw materials rebounded. The New Zealand dollar advanced on prospects a slowing U.S. economy will deter the Federal Reserve from raising interest rates, keeping the allure of the nation’s higher-yielding assets.

“The Australian dollar sell-off appears to be stalling, if only because it is so over-extended,” Tony Morriss, a currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney, wrote in a research note. Commodity prices will “hold well above previous long-term averages. This argues for the Australian dollar to find support above long-term averages.” …. Full Article: Source \

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From Telegraph.co.uk: Tumbling metal prices have taken their toll on miner Xstrata, which said it was shutting down a nickel mine in the Dominican Republic as the price of the metal continued to fall and oil prices remained high. The diversified miner, headed by chief executive Mick Davis, is in the middle of a bid for platinum group Lonmin, and said the shutdown at its Falcondo operation would last for four months - assuming that market conditions improve before then.

The closure would be used to repair furnaces and carry out maintenance at the mine, which has a capacity of 29,000 tonnes of nickel a year….. Full Article: Source

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From Mineweb.com: Platinum is still a relatively attractive investment in the market as the price is set to increase to $2,200 in the first half of next year and to remain at high levels of around $2000- $1,900/ounce through the end of 2009 and 2010, says the CPM Group’s commodities expert Jeffrey Christian.

Christian told Mineweb in an interview that the downward movement in the platinum price over the last few weeks was technically driven as new resources funds and hedge funds were simply selling because the platinum price had started to decline….. Full Article: Source

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From Seekingalpha.com: We always hear about gold trades “ending in tears” due to the rapid swings of the yellow metal. As some are finding out, apparently gold is not the only commodity with a volatile price. Declining prices recently have some commodity-specific hedge funds deep into negative territory.

As an example, the Ospraie Fund has suffered from bad trades on energy and natural resources stocks, resulting in a loss of roughly $1 billion from a fund that had peaked near $3.8 billion in assets late last year. The fund declined more than 13% in July alone. Back in 2006 the fund lost almost 20% from bad trades attempting to guess the direction of copper prices. Yet before 2006, the fund had returned annual gains of around 18% since 1999….. Full Article: Source

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From Thaindian.com: A regional conference on commodity development will be held here this month against a backdrop of a severe food crisis and unprecedented inflation globally.The Amsterdam-based Common Fund for Commodities (CFC), an international financial institution established by the UN, will hold the 2008 Regional Round Table Meeting (RTM) on Commodity Development in Dubai Aug 24-25 in collaboration with the United Arab Emirates ministry of environment and water.

“We’re holding the 2008 RTM here in Dubai to elevate regional public attention to a number of important issues related to the ongoing food crisis and its impact on the Middle East,” ambassador Ali Mchumo, managing director of CFC, said in a statement….. Full Article: Source

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From Indiatimes.com: HDFC Bank and Yes Bank are expected to be shareholders in the new commodities bourse promoted by Indiabulls Financial Services and government-run MMTC. Other than the two banks, India Potash, another PSU under the Department of Fertilizer, would also buy some stake in the commodities exchange.

Market sources said Indiabulls-MMTC combine has written to the Forward Markets Commission the regulatory body in India. And the three entities jointly is expected to buy up to 45% stake in the commodities exchange. …. Full Article: Source

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From Mineweb.com: Merger and acquisition opportunities abound for junior gold companies listed on AIM as junior mining companies are finding it very difficult to raise cash required to advance projects on the London Stock Exchange’s Alternative Investment Market (AIM).

Mid-tier gold producer and explorer Pan African Resources’ chief executive officer Jan Nelson said today a number of junior companies have run out of cash to develop projects and the company was both looking and talking to execute mergers and acquisitions. …. Full Article: Source

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From Xinhuanet.com: The dollar fell against major currencies on Tuesday as oil prices rebounded and U.S. stocks fell amid weak economic data and financial worries. The U.S. Labor Department reported on Tuesday that its Producer Price Index rose by 1.2 percent in July, much higher than expected. Core prices rose by a higher-than-expected 0.7 percent after stripping out food and energy.

The Commerce Department reported that housing construction fell to 965,000 housing units at a seasonally adjusted annual rate in July, the lowest pace since March 1991….. Full Article: Source

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From Mysinchew.com: Oil prices rose slightly in Asia on Wednesday to near $115 a barrel as investors awaited a weekly crude inventory report for evidence an economic slowdown in the U.S. is cutting consumer demand for oil products such as gasoline.

Light, sweet crude for September delivery was up 55 cents at $115.08 barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract rose $1.66 overnight to settle at $114.53 a barrel.

Investors are waiting for a report by the U.S. Energy Department’s Energy Information Administration on U.S. oil stocks for the week ended Aug. 15 later in the day. The petroleum supply report was expected to show that gasoline inventories fell by 3 million barrels, according to the average of analysts’ estimates in a survey by energy information provider Platts….. Full Article: Source

Posted on 20 August 2008 by VRS |  Email |Print

From Mineweb.com: In just over 30 days, benchmark dollar crude oil prices have crashed by up to 25%, further dragging down the entire commodities complex. Seen over a longer period, precious metals are down between 23% (gold) and 53% (palladium), while base metals have fallen from 18% (copper) to 56% (lead). Food prices have corrected, among key commodities, from 21% for soybeans to 31% for wheat.

The corrections follow years of a rising so-called commodity supercycle, which, on numbers generated over the past month alone, has terminated with a vengeance. The difference between the bursting of this bubble and others that have preceded, such as the dot.com craze which exploded in 2001, lies in demonstrable cash generation….. Full Article: Source

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From Theaustralian.com.au: A sharp drop in commodity prices is raising hopes that inflation is peaking in many parts of the developing world, especially Asia, providing welcome relief for the fragile global economy. Lofty prices for oil, food and other essentials remain a big challenge, especially for poor developing countries such as Haiti, Egypt and India, where earlier this year soaring costs triggered violent street protests, transport strikes and other unrest.

But recently, many of those prices have fallen significantly. Oil fell $US1.24 a barrel over the weekend to close at $US113.77, 22 per cent below its record price earlier this year.

Rice, a staple for the developing world, is down about 40 per cent since May, while palm oil, a source of cooking oil, is down a similar amount since peaking in March. Wheat, copper and a host of other commodities also have seen sizeable drops. …. Full Article: Source

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From Theglobeandmail.com: Copper and other base metals rallied Tuesday as the U.S. dollar weakened and as a jump in oil prices fuelled buying of commodities as a hedge against inflation. Nickel jumped 7.3 per cent to close at $19,395 (U.S.) a tonne, as the metal, mainly used in stainless steel production, was also boosted by news that Xstrata PLC was suspending operations at its Falcondo ferronickel mining operation in the Dominican Republic.

“The market is going to be fairly close to balance rather than being oversupplied, and there is the prospect that the stainless steel market will recover in the next few months on a year-on-year basis,” said Dan Smith, analyst at Standard Chartered….. Full Article: Source

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From Trinidadexpress.com: A cursory look at historic aluminum prices would suggest that, for the second time in 30 years, Trinidad and Tobago, and indeed the region, may have missed out on a golden opportunity to cash in on buoyant market conditions for this commodity metal. Over the last five years Government, companies and anti-smelter lobbyists have been in a running battle over the merits and demerits of a smelter project. In the meantime, the market has witnessed a doubling of aluminum prices from US$1430/tonne in 2003 to US$2900/tonne for 2008 to date. While plans to build the Alutrint facility remain on course, the question now is are we too late?

The desire to have an aluminum industry in T&T is not new. The national consultation on the best use of our natural resources identified aluminum as one of the best options for utilisation of Trinidad’s natural gas reserves. An aluminum smelter was considered to have greater potential for employment creation and local value added than say LNG. The smelter was viewed as an excellent example of Caribbean economic integration, combining bauxite from Suriname, Guyana and Jamaica with T&T’s natural gas resources….. Full Article: Source

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From FT: A rebound in the price of oil to $115 a barrel helped commodity stocks across Asia Pacific on Wednesday, but losses among car makers and other industrial companies almost completely offset the gains. Shares in Shanghai rose by nearly six per cent as speculation grew that the government would support the market – which is Asia’s worst performer this year – after the Olympics.

Overall the MSCI Asia Pacific Index was 0.1 per cent higher at 122.93 by late morning in Tokyo, after falling as much as 0.5 per cent earlier in the day….. Full Article: Source

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From INO: Copper futures rallied Tuesday largely in line with other commodities as the U.S. dollar weakened, traders and analysts said. “It’s just a general bounce in all of the commodity markets,” said Edward Meir, analyst with MF Global. “The dollar weakened after being stronger earlier today. I think there is a lot of short covering going on.”

Just ahead of copper’s close, the euro was up to $1.4782 from an early low of $1.4631. A weaker dollar tends to help commodities such as copper by making them cheaper in other currencies.The September copper contract rose 11.35 cents to settle at $3.4285 per pound on the Comex division of the New York Mercantile Exchange. December, which now has higher open interest, climbed 11.8 cents to $3.4270. …. Full Article: Source

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From Bloomberg: Sri Lanka’s central bank said lower fuel and food prices will help moderate Asia’s second-fastest inflation, after leaving interest rates unchanged for an 18th straight meeting. “With the easing of commodity prices in international markets, external price pressures on domestic inflation are likely to further abate in the months ahead,” the central bank said in a statement in Colombo today after maintaining its benchmark repurchase rate at 10.5 percent.

Crude oil has tumbled 22 percent from July’s record $147.27 a barrel and rice and wheat are down 29 percent and 35 percent from their peaks. That may help slow inflation across Asia in the months ahead and reduce the pressure on the region’s central banks to raise interest rates….. Full Article: Source

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From Thejakartapost.com: Indonesia’s Composite Index on Tuesday dropped 2.1 percent to close at 2,042, almost touching its year-low of 2,000 points, with analysts forecasting the decline will continue. The Indonesia Stock Exchange (IDX) has of late felt the pinch of crashing global commodity prices, spurred by a global equity fire sale.

Analysts have forecast that with no positives in sight, the stock market will continue in its state of free fall, which has been exacerbated by accelerated inflation and high production costs….. Full Article: Source

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From Indiatimes.com: The slowdown in the US on account of the crisis in the subprime mortgage market has not impacted India’s exports as expected by many. In 2007-08, exports continued to maintain its high growth tempo despite the effects of subprime crisis visible in the second half of the year. The US accounts for a sizeable chunk of India’s exports.

According to commerce ministry figures, the country’s merchandise exports grew by almost 26% in FY08 to $159 billion compared to about 23% in FY07. Though the performance is not significantly better than the previous year, it is notable because demand from major export destinations, like the US and Europe, were showing signs of slowdown. However, a closer look at the numbers indicates that more growth has been in low-end areas or primary products like sugar (95%), rice(87%), oil meal (62.4%), spices (49%) and iron ore (47%). These have largely benefited from high global commodity prices during the year. Volumes may not have correspondingly picked up. These five items have accounted for about half of the primary exports for the year. While soaring commodity prices have added to country’s imported inflation, the exports too seem to have benefited from this trend….. Full Article: Source

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