INDIA RE - EXPORT CLOVES ON GLOBAL SUPPLY CRUNCH

Kochi, June 27:

Soaring prices coupled with acute shortage of cloves in the world market have culminated in India, a net importer of the commodity, exporting some 300 tonnes of cloves to Singapore and Indonesia for the first time in recent history.

World markets are ruling very high with Indonesia at $19,000 to $21,000 a tonne, Madagascar at $ 15,000 a tonne. “No stocks are available at origins as the Indonesian cigar companies had mopped up whatever was available”, trade sources told Business Line. They said that shipping out of 300 tonnes from India had now squeezed the availability position here and in fact, “no exporters wanting to re-export”.

Many traders, exporters, importers who had sold forward cargoes in Mumbai and Delhi markets atRs600 – Rs700 a kg for July delivery, are said to be defaulting for want of material for delivery. At these rates cloves are not available. Zanzibar cloves are traded in Delhi market at Rs811 a kg for August delivery while ready markets are up by Rs40 a kg today at Rs 730 – Rs 780 a kg, they claimed.

According to the trade “in Madagascar, Brazil and Colombo markets also there have been defaults of shipment to India for nearly 30 full container load (fcl), which were contracted at $6,000 to $ 8,000 a tonne. Now, “as Indonesia is the buyer of cloves at $12,000-$14,000, all these exporters have shipped to Singapore or Indonesia for cash payments, many Indian importers are camping in growing areas hoping to get their contracted cargoes, but the outcome is going to be that there will be no shipments at all, because of huge difference in the prices”, they said..

Colombo crop is almost over and the current prices are ruling at $16,000 a tonne. “But there are no sellers, as all are waiting the prices to touch $20,000 and India will buy at all prices from Colombo because it is duty free”, they said. Now duty on imports from Madagascar and Zanzibar has also been reduced to 15 per cent. Comoros cloves too will attract 15 per cent duty as per free trade agreements with African countries, they said.

In India, they said, masala units are buying cloves in huge quantity. As the new season has started they are buying more stocks and hence next 8 months will see great demand for spices, this will push up prices of cloves to Rs1,000 a kg soon.

Meanwhile, there were no sellers for Indian cloves even at Rs 850 a kg. Growers in Nagarkoil region of Tamil Nadu said as the prices started moving up the traders there alleged to have formed cartel so as to dictate a uniform price to the growers.

The growers in turn are also reluctant to release their stocks as they anticipate the prices to touch Rs1,000 a kg, Mr Subramani, a grower told Business Line.

Indian requirement is estimated at somewhere between 10,000 and 12,000 tonnes a year and as against this the availability from the current indigenous production is estimated to be below 1,000 tonnes, they said.

Sharp fall in Indonesian cloves output due to an unknown disease which has reportedly destroyed trees in the major growing areas in Manado and Java areas has aggravated the supply situation skyrocketing the prices of this commodity in the Indian and international markets..

The Manado and Java areas contribute 80 per cent of the cloves production in that country. As the gestation period for cloves is 5 to 7 years to grow and bear fruit the major producing country is likely to have small crop for the next few years. As a result, the local Indonesian Cigar companies will have to buy cloves from other origins. The requirement of the cigar companies is estimated at 25,000 – 30,000 tonnes and hence they were buying from where ever it is available, paying through their nose, trade sources pointed out.

The current Indonesian prices are the highest ever in the cloves history following a nearly total crop failure, with 90 per cent trees affected by the disease, they said..

The Union Finance Ministry and Central Board of Excise and Customs is said to have issued alert notices to all ports, to check the cloves import cargoes and adopt uniform valuation for all imports, so as to arrest fraudulent activities such as mis-declaration and under invoicing, the trade said.

Source: The Hindu Business Line