Showing posts with label Prices. Show all posts
Gold slumps to three-year low, South Africa hit most
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| AFP Photo/Frank Rumpenhorst |
Gold has slumped to a near three-year low as investors continue to sell off assets traditionally used as hedge against inflation. The steep price drop hit leading gold producer South Africa most of all.
Gold fell 2.3 percent to $1,229 an ounce and silver dropped as well, having lost 4 percent. Both metals reached their lowest levels since September 2010.
The slump in gold was fuelled by the strong economic data released in the US on Thursday. The US data showed strong gains in business spending plans. Also US home prices posted record gains, indicating that recovery may be on track in the key sector of economy. These factors boosted stock markets and supported the US Fed’s plan to scale back the extreme monetary easing in the coming months.
Gold has been on a downward slide since last Wednesday, after Ben Bernanke, Federal Reserve chairman spoke on the US central bank’s intention to begin pulling out of the $85 billion per month bond-buying later this year.
Today the metal slipped to as low as $1,245 an ounce, having demonstrated a record quarterly drop. The metal has lost 10 percent of its value, or about $140 an ounce, since the beginning of last week.
South African producers suffer most.
Major price falls and sell offs in gold mostly hit South African producers, Bloomberg reports. Miners are being paid twice as much as current market prices and producers can afford. Strikes over pay put producers in South Africa in a complicated situation.
“The cost of production for South African miners has been propelled much faster than for other producers, due to labor intensive mining practices combined with sharply rising wages,” analysts of Fitch Ratings wrote in a report. The result is that the country’s mining companies “are the most exposed to the risk of falling gold prices.”
South African strikes and wage protests sometimes end in violence. Last year’s strikes at mines left 44 people dead and led to pay gains for some of about double the pace of inflation, Bloomberg says. Violence continued into 2013, as in the past month and a half three workers including members of the rival National Union of Mineworkers and Association of Mineworkers and Construction Union were killed.
“Anything below $1,400 an ounce is sort of a red line” for South African gold producers, David Davis, a Johannesburg-based analyst at SBG Securities told Bloomberg. “There’s a vast difference between what labor unions are demanding and what South African mines can afford. It points towards long drawn out negotiations that could end in dispute.”
The six-member FTSE/JSE Africa Gold Mining Index dropped 3.6 percent in Wednesday’s early trade in London, extending losses into the seventh consecutive day. Over the past year the index has already lost more than 50 percent.
The MSCI World Metals and Mining Index compared to Africa’s indicator lost much less, having dropped by as much as 19 percent.
Nestle gambles on two new plants in China
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| Workers erect a Nestle sign in eastern Beijing (Reuters) |
The world’s largest food company said it will open two factories in China next month in order to gain a market edge, despite the economic indicators of a slowing economy.
The Swiss food manufacturer told Bloomberg it plans to open a coffee plant in the eastern province of Shandong and a food factory in partnership with Yinlu Foods Group.
The new plant could double the company’s coffee production in China.
China has shown contraction in manufacturing as export demand has slightly eased, but Nestle anticipates a boost in coffee product demand from the world’s most populous nation.
“We are quite confident in the market,” Roland Decorvet, the company’s China chairman told Bloomberg.
“People still need to eat. The government clearly wants to focus on the growth of the domestic economy. The wages keep increasing; the urbanization keeps increasing as well,” said Decorvet.
Betting on Asia
Nestle recorded $100.5 billion in sales in 2012, and experienced an overall 5.9 percent in organic company growth, much of which is attributed to sales in emerging markets.
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| AFP Photo |
The company saw the weakest growth in China, with just 1.8 percent compared to the media 5.9 percent overall.
But sales in the Asian market have contracted in the first quarter of 2013, and in April the company reported its slowest first quarter revenue growth since 2009.
China has slightly missed government GDP targets, as first quarter growth was 7.7 percent, and not its targeted 8 percent. The decline in growth hasn’t derailed business, but experts foresee a slower unraveling.
Large developing economies, such as China and Russia more or less drove global growth in recent years as Europe struggled with recession, but experts believe the recession may sooner or later catch up with them.
In 2012, Nestle ha a 72 percent market share in the coffee industry in China and plan to spend $16 million on a coffee center in the southwestern Yunnan province. The company also plans to open a fourth plant in conjunction with Yinlu Food Group.
Fixed chocolate
Nestle allegedly played a role in a chocolate fix pricing scandal, and is under investigation by the Competition Bureau of Canada for conspiring, agreeing, and arranging to fix prices of chocolate products in Canada from 2002. Mars Inc, Hershey Canada Inc., and ITWAL Limited are also under investigation.
The companies face a possible fine of up to $10 million and a possible jail time for executives. The former president of Nestle Canada, Robert Leonida was charged, along with Sanda Martinez, former president of confectionery for Nestle Canada, and David Glenn Stevens, president and CEO of ITWAL.
Nestle has over 330,000 employees worldwide in 83 different countries and 461 factories.
