The Hindu Business Line : Short supply, demand push up global cloves price

Kochi, July 21 Fall in production and consequent short supply have pushed up prices of cloves both in the international and Indian market by 30 to 50 per cent during the past fortnight. If the current trend is any indication, traders claim, its prices might shoot up to $8,000 to 10,000 a tonne in the near future.

The main reason attributed to this sharp rise in prices is the poor crop in Indonesia which, according to trading sources, is only 10 per cent of its total crop. “Prices have increased from $5,000 to $7,500 a tonne in the season itself. Cigarette companies are buying heavily and will import cloves from Madagascar, Zanzibar, Comoros. They are likely to buyout the entire crop,” Mr Dhirish J. Momaya, Managing Director of Bangalore-based Dhirish International, a major importer of spices and chemicals, told Business Line.

According to him, the cloves crop in Sri Lanka, which was 3,500 tonnes, was consumed by India, availing the duty benefit. Now stocks have sold out and as a result, prices have soared from $4,800 to $6,500 a tonne in the last 10 days, he said.

The next crop in the Island neighbour is projected to be less, which “is a natural cycle for cloves”. Harvesting is expected to commence in Comoros, Zanzibar and Madagascar next month. The crop in Madagascar is estimated to be 8,000 tonnes while that in Zanzibar and Comoros is projected to be 4,000 tonnes and1,500 tonnes respectively. Prices in these origins have also gone up on good demand.

Demand up

The markets remained volatile. Demand has started picking up from Karachi, West Asia, Europe and the US. Meanwhile, duty-free imports from African countries into India is expected to push up prices of cloves “madly here”, trading sources predicted.

Stocks in India is less due to the dull market activity and global crisis in recent weeks. But a sudden demand of late has pushed up the prices from Rs 210 to Rs 360 a kg. New import costing has put the prices at Rs 450 a kg.

Going by the current trend, the prices might touch Rs 500 a kg soon, they claimed, adding “this will benefit Kerala farmers”.

What is significant is that the 40 per cent duty has encouraged legal trade and curbed fraudulent imports through Tuticorin, Navaseava ports and ICD Delhi, they pointed out.

Price quotes

Meanwhile, according to The Public Ledger on Friday, in Indonesia cloves traders and exporters “have become very ambitious with their price quotes of late, citing a disappointing crop in the country, and this has helped drag up prices in competing origins.”

Quoting reports from international traders, it said Indonesian cloves quotes had escalated to extremely high levels in the range of $7,200 a tonne to $7,600 a tonne c&f. European traders, it said, believe the Indonesian crop is likely to be in the region of 55,000 to 60,000 tonnes, compared with more than 1-lakh tonnes in 2007.

Meanwhile, Indonesian traders have claimed the crop will amount to only 35,000 tonnes.

The Public Ledger quoted Mr Emmanuel Nee of French trader Sivanil assaying “up to now, the market has only gone up in Indonesia. Of course, all other markets are trying to follow the trend and being a little bullish.” One processor and exporter of spices based in Surabaya, East Indonesia, said that the country’s farmers are very reluctant to sell at this stage.

Support levels

“For farmers, cloves are a currency. They know that the longer they keep, the better the price,” a second French trader said. A Dubai-based Indian trader was quoted as saying there was no real buying interest for the Indonesian material at these new high prices.

“The Indian market prices right now are not supporting anything over $5,500 to $5,600 a tonne for the dutyable cloves such as Zanzibar, Comoros and Madagascar and duty-free cloves such as Sri Lanka are being traded around $6,600 (a tonne c&f) levels.”

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