Changing dynamics of commodities amid covid - Narinder Wadhwa
India's domestic gasoline consumption had staged a strong rebound to 8 million mt in fourth
quarter 2020 from a low of 5 million mt in Q2 2020, Petroleum Planning and Analysis Cell
data showed.
The exponential surge in India's COVID-19 cases has affected the country's energy, metals and
agriculture markets; it has also cast a shadow on the international price outlook of some
commodities.
With India reporting about 300,000 cases daily for many consecutive days, there is a more likelihood
of lower consumption numbers of some commodities.
OIL: India would witness a year-on-year oil demand growth of 400,000 b/d in 2021, lower than an
earlier estimate of 440,000 b/d according to experts
With lockdowns like restrictions in major cities and industrial places and work from home mode of
working, the demand from oil will be less.
India's domestic gasoline consumption had staged a strong rebound to 8 million mt in fourth quarter
2020 from a low of 5 million mt in Q2 2020, Petroleum Planning and Analysis Cell data showed. As
some surveys by some global research agencies, the demand slipped to 7.8 million mt in Q1 this
year and was expected to pull back sharply to 6.5 million mt or lower in Q2.
Regional lockdowns threaten mobility and industrial activity. Refiners are reported to have cut run
rates marginally. The Run rates remained good until March, with average runs rising to 99% in March
from 97% in February.
The aviation and industrial fuel demand will take a hit. Some refineries may cut jet fuel and diesel
output as. Some of the major construction projects were reported to have been put on hold in an
effort to avoid crowded work environments.
GAS: Likewise, country’s city gas demand could drop by 25%-30% in the coming months. LNG
regasification volumes are reported to be down by more than 10%. Higher inventories are further
reported at Dahej and Hazira. Contracted cargoes may not have been cancelled however the spot
demand is said to have been affected
Steel: Steel production may be least affected .
Tata Steel, JSW Steel and ArcelorMittal Nippon Steel India have announced plans to supply oxygen
for medical use.
Despite the tumble in the automotive sector, hot-rolled coil prices remain high in India even as
domestic steelmakers step up efforts to supply liquid medical oxygen to offset the strain caused by
the surge in COVID-19 infections.
Steel consuming sectors were, however, undergoing a greater degree of operational cuts due to the
oxygen shortage. Maruti Suzuki and Hero MotorCorp, recently announced temporary production
shutdowns.
The Pandemic situation could potentially disrupt pellet exports. The Indian seaborne pellet prices are
facing rising pressure . At the ports, the loading operations are likely to be affected due to
manpower shortage.
Agriculture: Agriculture and allied activities have been exempted from government restrictions so
far, several markets remain closed. Micro and local level restrictions have stagnated market
demand for agricultural commodities in some pockets
• Rabi crop and harvest is expected to be good. However the storage and transportation could be
tricky under current circumstances.. Hopefully, the good harvest will have salutary impact. During
the previous year, it was positive
• Agricultural exports for commodities, such as sugar, are steady. The sugar stocks have been seeing
upward trend.
• .Almost three fifth of the country's palm oil consumption comes from hotels, restaurants and food
catering sectors. The demand may be affected.
• With some markets shut and supplies remaining tight, domestic wheat prices had risen in other
trading centers. In Rajasthan's key market, Jaipur, wheat prices increased to nearly Rupees 18,742/
mt ($250/mt) against around Rupees 17,769/mt at the beginning of April.
• According to USDA Attache, the Wheat exports from India during the year 2021-22 could be at 2
million MT , 26% lower compared to previous year
• At Indore , the major trading center in Madhya Pradesh state , the demand of wheat has been hit
as the market is shut due to the lockdown imposed by the state government.
• The farmers may find it difficult to sell to private traders due to localised restrictions of movement
of people and goods. The market participants in physical markets opine that the total wheat
procurement by the government from farmers could exceed expectations as. This could potentially
tighten supply in the open market and lead to a rise in domestic prices.
Oilseeds & Impact on Cotton - The edible oil pack gave phenomenal returns in FY21, with crude
palm oil topping rising as much as 73%. Soybean was also a major gainer, with the price jumping 63
per cent followed by soy oil (58 per cent).
Farmers could be more inclined towards cultivating oilseed crop against other kharif crops such as
cotton, which can give good returns in the latter part of the year on any decline in acreage compared
with last year.
