TPT July 2010

G lobal M arketplace a surplus of about 580,000 metric tons this year as growth in copper supply exceeds projected growth in industrial demand. For 2011, the Lisbon-based ICSG projects a smaller surplus of around 240,000mt as an expected increase in economic activity boosts demand in copper end-use markets. Limited by operational constraints and temporary cuts in 2009, world copper production is projected to increase by 6.7% (1.1 million mt) to 16.8 million mt this year. Capacity utilisation rates are expected to improve from around 80.7% in 2009 to an average of 84% in 2010. Energy New Delhi’s assumption of final say over natural gas pricing could dampen international interest in gas development in India Another disagreement over commodities pricing (See “World Steel Association,” above), this time at the national level, recently played out in India. A ruling by a three-judge bench of the Supreme Court of India endorsed the right of the government to set prices for the country’s natural resources. As reviewed in the International Herald Tribune , the ruling has its roots in a bitter falling-out between two billionaire heirs to India’s largest industrial fortune. (“India’s Top Court Settles Dispute on Energy Prices,” 7 May) The brothers Mukesh Ambani and Anil Ambani parted ways over one of Mukesh’s companies, Reliance Industries, which five years ago won development rights to an offshore natural gas field and agreed to sell gas to Anil’s business Reliance Natural Resources at a set price. Three years ago, the government set another – 79% higher – price for gas from the field. In considering whether Mukesh Ambani’s company should be permitted to withdraw from the existing contract, and command a higher price for all its gas, the Supreme Court had to address the question of whether India has sovereignty over its natural resources. For the brothers, billions of dollars hung in the balance. Reporting from New Delhi and Mumbai, respectively, Heather Timmons and Vikas Bajaj wrote, “The Supreme Court tilted the billions in Mukesh’s favor, [and] Anil’s company will be forced to pay a higher price for the gas. The government, in turn, will get much more in royalties.”

The judgment in the case runs to 268 pages, suggesting that the reasoning required some extenuation, even to the judges themselves. One of the three judges said in court that Reliance Industries, India’s largest private company, did not have an “absolute right” over the gas it offers for sale. The upshot of this – the head of contract dispute at a Paris-based business law firm told the Herald Tribune – is, “The [Indian] government has the right to tell investors how to price.” Another of the judges wrote that the brothers’ agreement was “a private pact between the members of the Ambani family” and therefore not legally binding upon the government. According to Ms Timmons and Mr Bajaj, “Lawyers who have been following the case said that the ruling’s specific reference to the family nature of the agreement was an indication that the court might not intend to overturn other legal contracts between publicly traded companies.” › On the other hand, the Ambani ruling might be interpreted as meaning exactly that. And, in its potential for deterring foreign investors interested in India’s abundant natural gas reserves, it has implications for the Indian energy sector. With the domestic industry falling well short of meeting demand, the country must import about 70% of the oil it uses. But India has sizable coal and natural gas reserves and New Delhi has been soliciting bids from foreign energy companies able to develop them. The Herald Tribune reporters wrote, “So far, though, international interest has been lukewarm, in part because of questions about profit sharing with the government and other companies.” Canada The Canadian economic rebound will likely outpace that of the US The International Monetary Fund in January predicted that Canada this year would have the highest growth rate of the G-7 industrialised nations, and recent indications support that forecast. Canadian economic expansion accelerated sharply during the first quarter, and the Bank of Canada is now projecting output growth of 3.7% this year and 3.1% in 2011. The independent strategic-consulting firm Oxford Analytica also sees a good period ahead for Canada, at least in part because it avoided a housing bubble and its financial system is not overburdened by problematic assets.

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J uly 2010

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