Indonesian demand sparks hike in cloves

The Public Ledger

Monday January 14 2008


INTERNATIONAL cloves prices have shown sharp increases over these early stages of the new year, fuelled largely by strong domestic demand in Indonesia and heightened speculation.

In the week ending January 11, European traders quoted Indonesian cloves at $6,200 a tonne c&f Singapore, compared with $4,100 a tonne in the week ending December 21. Over the same period Madagascan cloves were said to have reached $5,000 a tonne cif against $4,450 a tonne previously.

One Bangalore trader told The Public Ledger that Indonesia's major cigarette companies Gudang Garam and Samporena were purchasing cloves at higher market prices in order to cover local demand. Also, according to the same trader, local prices in Indonesia were as high as Rp60,000 per kg, equating to $6,200 a tonne fob Surbaya. Moreover, the trader added that his company had purchased Indonesian cloves at $5,700 to $5,800 a tonne in the last few days.

The Bangalore trader viewed Madagascan cloves as being quoted higher than the indications from European traders, citing instances of offers at $5,500 a tonne fob Tamatave.

Emmanuel Nee of French trader Sivanil agreed that strong domestic buying by Indonesian cigarette companies was pushing up prices. In addition, some Indonesian speculators were sitting on stocks. "Each time they receive a single demand they push the price up by $100 [a tonne], " he said. The weakness of the US dollar was also lending support to prices.

Mr Nee explained that the week to January 11 had been paticularly active, helping to push prices up to the latest highs and attain the peaks that Indian traders had projected.

"Although they (Indian traders) have not been exaggerating the trend, they were very early in their predictions, "Mr Nee observed. "Today they are not really buying at this level but they want to tell everyone the market is moving up and will keep on doing so because this will help the domestic market to awaken. Indian buyers are enquiring a lot, asking for small shipments here and there, but they are not buying huge quantities at this level." In addition, Mr Nee claimed that those who use cloves for cooking applications tend to limit their offtake when prices are high.Moreover, he viewed the latest surge in prices as driven solely by speculation. "The speculation is done on the fact that Indonesia has been buying a lot so the available stocks in Indonesia are not a lot and the next crop will not be as good as they expect. If that is the case Indonesia will come to the market and buy again, " Mr Nee said.

Moreover, if the forthcoming Indonesian crop turns out to be very small, then domestic and world prices could see some further short-term increases, he noted.

Mr Nee commented further that Singapore traders were making only tentative offers but no actual deals were being made. "In the meantime, Madagascar shippers are not offering anything and Comoros is empty in cloves, " he said.

Claude Cuvillier of the French broker of the same name remarked: "It is difficult to find sellers in Madagascar."

Cloves’ prices rise 25% as arrivals fall in Brazil

G.K. Nair
Kochi, Jan. 11 Export prices of cloves in Brazil have soared by 25 per cent this week following decline in arrivals at the market there.
Latest reports, according to information made available to Business Line by the Brazilian Pepper Trade Board (BPTB), which trades in spices, “the harvest is smaller than originally previewed – between 4,000-5,000 tonnes. We believe that bids below $4,700 would not be considered at this moment”.
New crop of cloves is slowly coming to the market. Slow drying process in Brazil is also contributing to the thin arrivals, it said.Bullish sentiment
The first week of the year showed a strong bullish sentiment among the growers despite buyers’ (exporters) absence due to holidays. As a result, export prices jumped to $4,800 and further to $4,990 a tonne, which is an increase of 25 per cent compared to one week before, it said.
According to earlier reports, the global output of cloves is estimated to be lower this year following drop in production in several producing countries.
The output in Sri Lanka where harvesting is to take place this month is estimated to be around 2,000 tonnes as against the earlier projection of 5,000 to 6,000 tonne.
Similarly, in Madagascar also it is estimated to be between 1,500 tonnes and 2,000 tonnes as against its normal production of 12,000 tonnes. In Zanzibar it is estimated to be 800 tonnes where the normal output used to be 4,000 tonnes.
The prices quoted here is $5,400 a tonne. Comoros is reported to have produced only an estimated 600 to 700 tonnes and the entire quantity has been sold out.Indonesian output
In Indonesia, the world’s largest producer of cloves, where harvesting is in March/April, the total production is estimated to be around 20,000 tonnes, which is 20 per cent of its total output.
Indonesia had a bumper crop with a total production of around 80,000 tonnes. The price quoted at present is $4,900 a tonne. Indonesia which uses a substantial quantity of its cloves in the tobacco industry is unlikely to have much for exports, a Bangalore-based cloves dealer told Business Line.
India is a major consumer of cloves with an annual demand of 6,000 to 8,000 tonnes. The indigenous production is estimated at below 2,000 tonnes. The gap in demand and supply is met by imports. The total import of cloves during April – October 2007-08 stood at 3,610 tonnes valued at Rs 44.33 crore against 2,881 tonnes valued at Rs 53.97 crore in the corresponding period of last fiscal. The unit value during the first seven months of the current fiscal was at Rs 122.80 a kg compared to Rs187.35 in the same period in 2006-07.
From The Hindu Business Line...