Rio Tinto Sees China, India Driving Demand Growth for Diamonds

By Aibing Guo and David Stringer - Sep 20, 2014

Surging demand for diamonds in China and India may see the two countries match the size of market in the U.S., the biggest consumer, by 2020.
“We will see strong growth in India as soon as the country gets its house in order with the new government,” Jean-Marc Lieberherr, managing director of Rio Tinto Group (RIO)’s diamonds unit, said in an interview. “With China, policy is moving more toward encouraging domestic consumption rather than infrastructure and that’s going to have a positive impact.”
The middle class in China and India, the world’s fastest growing jewelry market, may double by 2015 compared with 2010, boosting demand for diamonds, according to WWW International Diamond Consultants Ltd. Global demand will probably rise 4 percent to 4.5 percent this year with U.S. consumption increasing as much as 6 percent, according to De Beers, the biggest producer.
China and India, where about 21 million marriages take place each year, may account for half of the growth in diamond demand in the five years from 2013, WWW International said in a January 2013 presentation.
Rio Tinto may bring its Bunder diamond project in central India’s Madhya Pradesh state into production as early as 2019, Lieberherr said. The Bunder deposit, found in 2004, was the first diamond discovery in India in about 40 years and is one of only four new diamond mines likely to enter production in the next decade, according to the world’s second-biggest miner.
Total spending by Rio Tinto on projects and expansions across its commodities is expected to be $8 billion in 2015, less than half its outlay in 2012, as it lowers costs amid a decline in commodity prices, the London-based producer said last month.
Rio opted in June 2013 to retain its diamond unit after failing to find a buyer and deciding not to pursue an initial public offering.
“We like diamonds, we think the fundamentals are very, very strong,” Lieberherr said at a Sept. 18 press conference in Hong Kong.
To contact the reporters on this story: David Stringer in Melbourne at dstringer3@bloomberg.net; Aibing Guo in Hong Kong at aguo10@bloomberg.net
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Andrew Hobbs, Indranil Ghosh

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Coal India Said to Cut Auctions to Meet Power Demand

By Rajesh Kumar Singh and Debjit Chakraborty - Sep 18, 2014

Coal India Ltd. (COAL) has cut the amount of the fuel it’s selling at competitive auctions to bolster supplies to power stations to meet demand, said people familiar with the matter.
The government has asked the state-run monopoly to cut the quantity auctioned to increase coal supplies at power plants, which fetch the company almost half the price of open sales. Spot electronic auction sales in the two months to Aug. 31 dropped 70 percent to 2.52 million metric tons from the same period a year ago, according to two people, who asked not to be identified as the information isn’t public.
Greater supplies to utilities are critical to Prime Minister Narendra Modi’s goal of accelerating economic growth and providing round-the-clock electricity to every household in the country. The revenue loss from lower auction sales may prompt the company to raise prices, said Giriraj Daga at Mumbai-based Nirmal Bang Equities Pvt.
“Everyone is betting on a price hike,” he said. “Even a 50 rupees-a-ton increase will give Coal India the delta to offset lower e-auction sales.”
A.K. Dubey, Coal India’s chairman, and Marketing Director B.K. Saxena couldn’t be reached at their office phones.
Kolkata-based Coal India sells a part of its output through auctions to customers that don’t have long-term purchase contracts. These sales, which account for about 10 percent of its production, contributed 40 percent to the miner’s earnings before interest, tax, depreciation and amortization in the year to March 31, 2013.

Supply Bottlenecks

A surge in economic activity has led to higher demand for the fuel, exacerbating supply bottlenecks caused by heavy rains at some mines and slow railway transport. The national peak shortage in August expanded to 6 percent from an average 3.5 percent in July, according to the Power Ministry.
Coal India has been asked to halve e-auction sales in the year that began April 1 from 58 million tons in the previous period to reduce shortages at power plants, Coal and Power Minister Piyush Goyal told lawmakers in parliament on Aug. 6.
While fewer stocks for auctions is leading to a spike in prices, it may not be enough to compensate for the lower volume being sold, said Viresh Oberoi, managing director of Mjunction Services Ltd., which auctions the commodity.
“There’s a definite risk of a hit to the company’s profitability,” said Prasad Baji, an analyst at Edelweiss Financial Services Ltd. (EDEL) in Mumbai. “There’s some room to increase prices, but pressure to keep power prices in check may deter such plans.”
Maintaining Coal India’s profitability is crucial to the success of a planned 10 percent share sale by the government, said Daga. India, which owns 89.65 percent in the miner, approved a share-sale plan for the company on Sept. 10.
“A price increase will immediately call for re-rating of the stock and this will fetch higher returns for the government during the share sale,” Daga said.
To contact the reporters on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net; Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net
To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net Abhay Singh, Indranil Ghosh

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Xi to Meet Modi for Dinner as Economy Tops Agenda

By Bibhudatta Pradhan - Sep 16, 2014

Chinese President Xi Jinping heads to India today as the world’s two most populous countries look to bolster economic ties and resolve a long-running border dispute.
Prime Minister Narendra Modi will receive Xi this afternoon in the western state of Gujarat, which he ran before taking office in May. The leaders will share a private meal along a riverfront in the state’s former capital of Ahmedabad and also hold talks in New Delhi tomorrow.
“It’s a very significant visit as leaders of Asia’s two BRIC countries want to create more economic momentum in the bilateral relationship,” Rajiv Biswas, IHS Global Insight’s Asia-Pacific chief economist, said by phone from Singapore. “Modi is trying to improve India’s exports to China to reduce the trade deficit, and also to boost Chinese investment flows into the country in infrastructure and urban development.”
Modi is seeking Chinese support for his moves to revive Asia’s third-biggest economy while deterring it from asserting control over disputed land along the border. He met Japanese leader Shinzo Abe in Tokyo earlier this month and will visit President Barack Obama at the White House two weeks from now.
Modi told Chinese journalists yesterday that the two countries “can create a better tomorrow for all of mankind.” More than a third of the world’s people can have better lives if India and China boost economic cooperation, he said, according to an Indian government statement. The BRIC grouping, also comprising Russia and Brazil, will grow faster in 2014 than the global average, according to data compiled by Bloomberg.

Investment, Trade

China is India’s largest commercial partner, and also accounts for its biggest trade deficit. While bilateral commerce exceeded $68.5 billion last year, India posted a trade shortfall of $34.4 billion on imports of Chinese-made heavy machinery, telecom equipment and home appliances, according to data compiled by Bloomberg.
India is seeking greater market access in China and will probably sign an agreement for China to set up industrial parks, Indian Trade Minister Nirmala Sitharaman told reporters in New Delhi on Sept. 10. Xi will also announce investments in India’s railways, the Press Trust of India reported.
In the 14 years through June, China was India’s 28th largest source of foreign direct investment with inflows worth $411 million, or 0.18 percent of the total, government data show. Japan was fourth and the U.S. was fifth.

‘Territorial Mindset’

Tensions have simmered in the past few years over claims to disputed territory on their mountainous border. In campaign speeches earlier this year, Modi warned China to drop its “mindset of expansion.”
India accuses China of occupying 38,000 square kilometers (15,000 square miles) in Jammu and Kashmir, while Beijing lays claim to 90,000 square kilometers of land in the Indian state of Arunachal Pradesh.
Chinese incursions have occurred in the area this month, PTI reported, and the countries have seen sporadic border clashes over five decades. They fought a war in 1962 and China opposes the Dalai Lama, Tibet’s spiritual leader, who campaigns for Tibetan autonomy and human rights while in exile in India.
“Regarding the border issue, the Chinese stance has always been consistent and clear,” Chinese Foreign Ministry spokesman Hong Lei said in a briefing in Beijing yesterday. “The Sino-Indian borders have been peaceful for a long while and the border issue hasn’t affected the development of the Sino-Indian relations. We hope both countries can keep it up to maintain this healthy momentum.”

Sea Exploration

China also warned that it would oppose any Indian agreements with Vietnam to explore for oil and gas in disputed areas of the South China Sea, Times of India reported, citing Hong.
India will discuss “all substantive issues of interests” including the border dispute, India’s Foreign Ministry Spokesman Syed Akbaruddin, said in New Delhi on Sept. 15. Investment in smart city projects, railways and cooperation on nuclear energy will probably be included, he said.
Xi’s first visit to India as head of state follows Modi’s visit to Japan, which has its own territorial dispute with China. Abe pledged a sweeping upgrade of economic and security ties with India, offering 50 billion yen ($480 million) in infrastructure loans and pledging 3.5 trillion yen of public and private investment and financing over five years.

Candlelight Meal

The meeting between Modi and Xi is “unlikely to result in meaningful progress towards any bilateral strategic partnership,” Arvind Ramakrishnan, head of India at U.K.-based risk adviser Maplecroft, said in an e-mail. “Modi is far more inclined to cultivate strategic ties with Japan and the U.S. in order to make India a counter-balance against Chinese influence in the Asian region.”
Still, the countries have links going beyond 145 B.C., with China exporting silk to India in exchange for pearls and coral. Modi, who turns 64 today, is India’s first prime minister born after independence in 1947. Xi, 61, is China’s first leader born after the 1949 revolution.
Xi and Modi will walk along a river and share a candlelight dinner that will feature more than 100 dishes, Xinhua reported. Performances during the meal will feature traditional Indian dancing and automated lions, it said.
India can benefit from China’s strength in creation of infrastructure and development of the manufacturing sector, while India’s strength in software can help Chinese companies become more efficient and competitive, Modi said yesterday.
“India and China are bound by history and connected by culture,” he told reporters in New Delhi. “The arithmetic and chemistry of our relations convinced me that together we can script history and create a better tomorrow for all of mankind.”
To contact the reporter on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Jeanette Rodrigues, Dick Schumacher

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