KOLKATA/PUNE/AHMEDABAD/KOCHI: Commodity prices in India have dropped in line with global markets which fell for the fifth successive day on concern that Japanese demand will take a while to pick up after the strongest earthquake in its history damaged northern parts of the country. Jittery traders moved out of agricommodities to safe haven bullion which edged up in Asia on Wednesday.

The softening in commodity prices comes as a welcome relief to Indian manufacturers who have been grappling with high raw material prices for several months now. Sectors that will immediately benefit include tyres, food and beverage, cooking oil, meat and livestock. Car companies too will benefit as the prices of two precious metals — palladium and platinum used in catalytic converters — have dropped.

Gold and silver both edged up in Asia on Wednesday as equity markets stabilised, eliminating the margin-related selling that depressed precious metals on Tuesday. The most-active gold for April delivery on the Multi Commodity Exchange was trading 0.33% higher at Rs 20,672 per 10 gram, after hitting a high of Rs 20,690. The contract recovered from a one-month low of Rs 20,469 struck in the previous session, a level last seen on February 16.

Platinum group metals fell because potential radiation disasters weakened expectations of demand from the Japanese automotive industry. Japan's leading carmakers, including Toyota, Nissan, and Honda, have decided to stop production. Automakers are the largest consumer of platinum and palladium. Spot platinum on Wednesday was off $14 at $1,687/oz, after dropping 3% Tuesday, while spot palladium was at $710/oz, up $5 after plunging 5% in the previous session. "A drop in platinum and palladium prices augurs well for the automobile industry. Both these precious metals are used in catalytic converters to check emission," said P Balendran, VP, General Motors India.

The agricommodity sector has been hit the most, with sugar leading the pack. Despite the falling global sugar prices, the sugar industry is desperate to export as the domestic prices are hovering between Rs 2,550 per quintal and Rs 2,800 per quintal. "The falling global prices mean that the premium on sugar that we could get over the domestic price has reduced substantially. It is still viable for India to export sugar, provided the decision is taken very quickly before the global prices fall further," said Abinash Verma, managing director, Indian Sugar Mills Association.

source: ET

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