India may suspend food futures trading amid growing concerns of speculative trading inflating commodity prices. Finance Minister Palaniappan Chidambaram told reporters at a meeting of the Asian Development Bank this weekend that "'if rightly or wrongly people perceive that commodities- futures trading is contributing to a speculation-driven rise in prices, then in a democracy you will have to heed that voice." Such a move is not unprecedented in India, where commodities markets are closed to overseas funds and thus strongly reflect domestic price pressures. The government banned futures trading on wheat and rice for a short period last year to control inflation, doing the same for lentils in 2006. The Finance Minister believes, however, that food price inflation is not tied to monetary inflation in this case. Instead, "�food being converted into biofuels is the single biggest reason why we are facing this crisis," he said at the ADB meeting.
Constrained food supply isn't the only shortage impacting the commodities markets. Rolling power shortages in Chile, China and South Africa have forced some of the world's most active metals mines to cut production. Bloomberg estimates "the energy used by China's aluminum smelters each week could provide enough power for two million people for an entire year." Metals companies BHP Billiton, Rio Tinto and Anglo-American have all been forced to cut production, with Anglo-American leading the setback on a 10 percent drop in its South African operations. Barclay's research director Kevin Norrish commented, "problems in South Africa and China with electrical capacity are not just bad luck, but result from a lack of investment." While BT FInancial Group's Tim Barker says, "we've been through a period of 20 years when there hasn't been much built in terms of new capacity." With meteorologists predicting a hot summer, energy shortages in developing countries may increase as hydroelectric power sources cut production.
As some supply-siders would have it, there is a trickle down effect to all of this. Production declines coupled with industrial-scale building booms in China and India have led to steadily rising construction costs. In March, high construction costs delayed the production schedule at REC's new polysilicon plant in Moses Lake. Input prices have significantly affected earnings results of at least one ethanol company. Finally, the high price of steel may have been a factor contributing to Shell's decision to drop out of the London Array project. It looks as though some developers - at least in the wind industry - are getting creative, relying instead on less-costly cement and examining the possibility of floating wind turbines that don't require steel monopiles.
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India may suspend food futures trading amid growing concerns of speculative trading inflating commodity prices. Finance Minister Palaniappan Chidambaram told reporters at a meeting of the Asian Development Bank this weekend that "'if rightly or wrongly people perceive that commodities- futures trading is contributing to a speculation-driven rise in prices, then in a democracy you will have to heed that voice." Such a move is not unprecedented in India, where commodities markets are closed to overseas funds and thus strongly reflect domestic price pressures. The government banned futures trading on wheat and rice for a short period last year to control inflation, doing the same for lentils in 2006. The Finance Minister believes, however, that food price inflation is not tied to monetary inflation in this case. Instead, "�food being converted into biofuels is the single biggest reason why we are facing this crisis," he said at the ADB meeting.
Constrained food supply isn't the only shortage impacting the commodities markets. Rolling power shortages in Chile, China and South Africa have forced some of the world's most active metals mines to cut production. Bloomberg estimates "the energy used by China's aluminum smelters each week could provide enough power for two million people for an entire year." Metals companies BHP Billiton, Rio Tinto and Anglo-American have all been forced to cut production, with Anglo-American leading the setback on a 10 percent drop in its South African operations. Barclay's research director Kevin Norrish commented, "problems in South Africa and China with electrical capacity are not just bad luck, but result from a lack of investment." While BT FInancial Group's Tim Barker says, "we've been through a period of 20 years when there hasn't been much built in terms of new capacity." With meteorologists predicting a hot summer, energy shortages in developing countries may increase as hydroelectric power sources cut production.
As some supply-siders would have it, there is a trickle down effect to all of this. Production declines coupled with industrial-scale building booms in China and India have led to steadily rising construction costs. In March, high construction costs delayed the production schedule at REC's new polysilicon plant in Moses Lake. Input prices have significantly affected earnings results of at least one ethanol company. Finally, the high price of steel may have been a factor contributing to Shell's decision to drop out of the London Array project. It looks as though some developers - at least in the wind industry - are getting creative, relying instead on less-costly cement and examining the possibility of floating wind turbines that don't require steel monopiles.
