Commodity traders stare at big losses
Sudden drop in prices catches importers, exporters off-guard.
By Sugata Ghosh & Deepa Krishnan , ET Bureau |
MUMBAI: Countless Indian traders have been trapped by a brutal commodity market. Consider these examples: A small-time importer in Coimbatore is fighting bankruptcy after placing an order for two shiploads of iron scrap.
By the time the cargo reached India in little over a month, prices had crashed 70%. His buyers have backed out and the man is facing a Rs 100-crore loss.
Across the state border, cashew kernels which have reached Kerala from Ivory Coast are piling up. The kernels have to be processed for re-export. But there���s a problem: many overseas buyers are no longer interested since prices have dipped.
In Mumbai���s chemical mart, a sulphur importer is refusing to lift the cargo from the port. In less than two months, prices have crashed from $700 a tonne to $65, and he has nobody to sell to.
These aren���t isolated instances. Across the spectrum of commodities ��� scrap, iron ore, sulphur, solvents, dyes, soda ash and even edible oil ��� local traders have been caught on the wrong foot. There are instances where importers have preferred to pay the penalty rather than pick up stocks from docks at a price which they can���t recover.
Some of them, like the Coimbatore-based scrap trader, are picking holes in the shipping and letter of credit documents to wriggle out of the contracts. A few are even willing to surrender the collaterals to banks with whom they had opened letters of credit.
���The drop in price was sudden. Sulphur importers who had booked consignments in advance are finding no takers,��� said Chandrakant Sanghvi, a liaisoning agent in Mumbai.
Many exporters are also firefighting . Some iron ore exporters have now discovered that their Chinese buyers have disappeared with prices dropping to $55 a tonne from last year���s high of $135.
By the time the cargo reached India in little over a month, prices had crashed 70%. His buyers have backed out and the man is facing a Rs 100-crore loss.
Across the state border, cashew kernels which have reached Kerala from Ivory Coast are piling up. The kernels have to be processed for re-export. But there���s a problem: many overseas buyers are no longer interested since prices have dipped.
In Mumbai���s chemical mart, a sulphur importer is refusing to lift the cargo from the port. In less than two months, prices have crashed from $700 a tonne to $65, and he has nobody to sell to.
These aren���t isolated instances. Across the spectrum of commodities ��� scrap, iron ore, sulphur, solvents, dyes, soda ash and even edible oil ��� local traders have been caught on the wrong foot. There are instances where importers have preferred to pay the penalty rather than pick up stocks from docks at a price which they can���t recover.
Some of them, like the Coimbatore-based scrap trader, are picking holes in the shipping and letter of credit documents to wriggle out of the contracts. A few are even willing to surrender the collaterals to banks with whom they had opened letters of credit.
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���The drop in price was sudden. Sulphur importers who had booked consignments in advance are finding no takers,��� said Chandrakant Sanghvi, a liaisoning agent in Mumbai.
Many exporters are also firefighting . Some iron ore exporters have now discovered that their Chinese buyers have disappeared with prices dropping to $55 a tonne from last year���s high of $135.
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