Commodities Comment:India’s gold imports face continuing,challenge from government policy

Feature article

    Indian gold imports have recovered from the bashing they took fromgovernment intervention in 2013/2014but remain lower than in previousyears, and the government has announced some new schemes to reducethem further. How negative these will be is hard to call but we believe shortterm the economy is likely to be a more important driver. A bigger risk in thelonger term is the spread of a modern financial system.Latest news

    Precious metal prices came under further pressure on Thursday on a strongerdollar, with silver falling below $15/oz and platinum flirting intra-day with the$1,000/oz level. Tin was the outperformer, gaining 3.3% and back above$15,000/t.

    Rio Tinto released 2Q production results on Wednesday, with output broadlyin line with Macquarie’s estimates for iron ore, copper and aluminium. Theinteresting takeaway was that iron shipments were a little lower than expecteddue to poor weather (cyclones in March and May), and the company has cutthe shipment target for CY15by 10Mt to 340Mt due to the outages. The newfigure implies an annualised run rate ahead of the targeted ~360Mt for 2H(with a potential boost from inventory sales), which our analysis of recentweekly port data implies the miner has already reached.

    US met coal producer Walter Energy filed for voluntary/pre-packagedChapter 11Bankruptcy protection on Wednesday 15June. The filing coversits US operations, and the terms of the restructuring assume senior lendersconvert all of their debt into equity. However, if their timeline and othermilestones are not met, the filing calls for Walter to sell substantially all of itsassets through a court-supervised auction. Walter’s filing has not come as asurprise; the question now is how much, if any, of Walter’s US met coalproduction is removed from the market both in the short and long run.

    Given that its Jim Walter Alabama operations (No.4and No.7) are goodoperations on a longer-term market view, the risk to the market is that theycontinue to operate through and beyond the debt restructuring