China to Boost Commodity Imports to Build Stockpiles

China, the world’s second-biggest energy user, will increase imports of commodities including oil and boost inventories of strategic raw materials while prices are at their lowest in seven years.

China will expand purchases of important resources, Premier Wen Jiabao said in a report delivered to the legislature’s annual meeting today in Beijing. The country will increase emergency stockpiles, the National Development and Reform Commission, the country’s top planner, said separately.

The world’s third-largest economy imports more than 40 percent of its oil, contributing to benchmark oil prices in New York reaching a record $147.27 a barrel in July last year. Oil has fallen about 70 percent from the record as the global recession cuts demand.

“China’s intent to build strategic reserves and product inventory will help mitigate some of the weakness” in domestic oil consumption, Credit Suisse research analyst Prashant Gokhale said in a report today.

The nation’s current strategic stockpiles of mineral resources are insufficient to fend off “global market risks,” the Ministry of Land and Resources said in January, without elaborating. China will build emergency stockpiles of coal and metals such as copper and chrome to guard against potential supply disruptions, the ministry said then.

Government stockpiles of oil will reach 12 million tons in 2010, equivalent to about 30 days of imports, Chen Deming, the former vice chairman of the National Development and Reform Commission, said in September 2007.

Stockpile Plan

The government has finished drawing up a plan to build the second phase of the country’s oil stockpiling with a capacity of 26.8 million cubic meters, the commission said in November. The nation is building four stockpile bases in the eastern provinces of Zhejiang, Shandong and Liaoning, it said.

China is building reserves to take advantage of weak commodity prices and enhance national security, analysts have said. The Reuters/Jefferies CRB Index of 19 commodities this year fell to the lowest level since June 2002.

The Chinese government will tap its $1.95 trillion currency reserves, the world’s largest, to secure resources, China National Petroleum Corp., the country’s biggest oil producer, said last month.

Currency Reserves

China earlier this year entered into an oil-for-loans accord with Brazil and Venezuela. Russia agreed last month to supply China with 15 million metric tons of oil a year for the next 20 years in return for $25 billion in loans.

State-owned companies last month announced plans to invest $22 billion in miners, securing iron ore, copper and zinc assets from debt-laden companies unable to secure funding in the global recession.

China Investment Corp., the $200 billion sovereign wealth fund, may invest in “undervalued” commodity assets, Executive Vice President Jesse Wang told reporters yesterday on the sidelines of a meeting of the country’s legislative advisory body in Beijing.

The nation’s government is buying commodities as it attempts to diversify investments away from Treasuries. China boosted purchases of U.S. debt by 46 percent to a record last year.

China should invest its foreign exchange reserves in gold and copper, rather than in U.S. Treasuries to seek higher returns, Fu Jun, vice chairman of All-China Federation of Industry & Commerce, said at the congress today.

“We don’t need to buy more Treasuries as the returns are low, whereas if China buy copper and gold, the annual returns could be as high as 10 percent,” Fu said.

Gold Standard Fans Yearn for Great Depression: Michael R. Sesit

Gold can be worn as jewelry, used as an investment and deployed as a hedge against economic and political risk. It can also serve as the anchor of a country’s monetary and exchange-rate policy.

The first is a matter of personal taste. Investments and hedges are often related; their success boils down to the price initially paid for the metal. History shows that as a hedge and investment, bullion over the years has performed both spectacularly and miserably, depending on the time frame.

A return to the gold standard, where countries peg their currencies to a given quantity of the metal and thus to one another, is a bad idea. Gold-based monetary systems are overly rigid and restrictive, possess a deflationary bias and can be volatile. They make long-term inflation dependent on the pace of mining output in places such as China, South Africa and Russia. Bullion-based policies are also as prone to political manipulation as those not anchored in the metal -- something few gold bugs are willing to acknowledge.

Gold has been on a tear. Futures soared 35 percent from $705 an ounce on Nov. 13 through March 2. Before retreating, the metal traded as high as $1,007 on Feb. 20, its first move above the $1,000 plateau in almost a year.

Extended Recession

The high price reflects investors’ concerns that massive deficit spending and ultra-loose monetary policies will reignite inflation. Paradoxically, worries about an extended recession and that policy makers won’t succeed in rescuing the global banking system also haunt investors.

Gold is now regarded as a hedge against both inflation and deflation, says Alan Ruskin, the chief international strategist at Greenwich, Connecticut-based RBS Greenwich Capital Markets Inc. The first is reflected in the high dollar price of bullion, the second by the surge in gold’s price in euros.

When gold last traded at more than $1,000 on March 18, 2008, the metal’s price was 643 euros an ounce. Yesterday, it was 743 euros in late European trading. Some folks interpret gold’s rally against the dollar at a time the greenback is strengthening against many currencies as a sign of investor disenchantment with fiat, or paper, money -- legal tender with no tangible backing except the good faith of the government that issued it. The risk is that hyperinflation may render it worthless.

‘No Safe Store’

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value,” former Federal Reserve Chairman Alan Greenspan wrote in 1966, when he was running consulting firm Townsend-Greenspan & Co. in New York. “This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process.”

Not so fast, Mr. Greenspan.

A gold standard tends to have a recessionary bias. When speculators and others attack a country’s currency, the burden usually falls on that nation to adjust by contracting its economy and increasing unemployment. The system places no matching requirement on countries with “strong” currencies to adjust.

The inflexibility of the gold standard makes it difficult for governments to adopt policies best suited to their domestic economic needs.

Take South Korea. Its currency, the won, has fallen 29 percent against the dollar in the past six months. Such a depreciation wouldn’t have been permitted under a gold standard. Korea would have been required to support its currency by raising interest rates to maintain the won’s parity with bullion, exacerbating an already virulent recession.

Gold and Depression

In a parable with relevance to today’s economic environment, “attachment to the gold standard played a major part in keeping governments from fighting the Great Depression, and was a major factor turning the recession of 1929-1931 into the Great Depression of 1931-1941,” Bradford DeLong, an economist at the University of California, Berkeley, wrote several years ago.

Commitment to the gold standard prevented the Fed from expanding the money supply in 1930 and 1931, forcing President Herbert Hoover “into destructive attempts at budget-balancing in order to avoid a gold-standard generated run on the dollar,” DeLong said.

China, the U.S., South Africa, Australia, Russia and Peru make up the six biggest gold producers. If their mining operations were interrupted by, say, political upheaval, it could lead to deflation and rising unemployment. In contrast, major improvements in mining technology could ignite inflation.

BP Shuts Units, Cuts Runs at Texas City Oil Refinery

BP Plc was forced to shut units and curtail operations because of a malfunction at its Texas City refinery, the fourth-largest in the U.S.

BP is still determining how long the units will be off line, spokeswoman Sheila Williams said today by telephone from London, where BP, Europe’s second-largest oil company, is based. The malfunction occurred in a sulfur recovery plant early yesterday morning, Williams said.

Production rates from units that produce large amounts of sulfur, such as cokers and hydrotreaters, have been reduced, a person familiar with the refinery operations said.

The fault may reduce supplies of gasoline as demand recovers before the peak summer driving season. The Texas City refinery, which can process 475,000 barrels of oil a day and is BP’s largest, returned to normal operations at the end of 2008 after a blast killed 15 people three years earlier.

BP expects to flare, or burn off gases into the air, until 2:30 a.m. local time tomorrow, according to a filing with state environmental regulators. An estimated 30,000 pounds of sulfur dioxide may be emitted during the flaring, which began at 2:30 a.m. yesterday, the filing showed.

Gasoline for April settlement rose $1.08, or 0.8 percent, to $1.297 a gallon at 7:02 a.m. local time on the New York Mercantile Exchange.

Flares are safety devices that prevent excessive pressure from building up in processing units that are being shut down or started up. Sulfur-recovery plants capture and hold sulfur removed in fuel-processing.

CFTC Probing United States Oil Fund in Crude Trades

The U.S. Commodity Futures Trading Commission said it is investigating the involvement of United States Oil Fund LP and other investors regarding an increase in the price difference between two oil contracts this month.

The United States Oil Fund is managed by Alameda, California-based United States Commodity Funds LLC and maintains holdings in West Texas Intermediate crude oil, the grade traded on the New York Mercantile Exchange since 1983. The investigation announced today is part of the CFTC’s larger national oil-market probe that was announced last year.

“I want to reassure the public that the CFTC takes seriously issues surrounding price movements in our nation’s vital energy markets,” Stephen Obie, acting director of enforcement at the CFTC, said in an e-mailed statement.

The agency is investigating whether the United States Oil Fund and other investors affected the price of oil on Feb. 6.

To maintain its holdings in oil futures, the exchange-traded fund sells, or “rolls,” its front-month contracts and buys second-month futures on four predetermined days every month.

The CFTC can compel testimony under oath and gather information related to oil trades, it said in the statement.

The United States Oil Fund’s size means the rolls can cause the front-month prices to decline relative to second-month contracts, widening the so-called contango, analyst Stephen Schork said yesterday. Market participants can predict this effect and potentially profit by making the same trade before the fund does, according to Schork.

WTI prices on Feb. 6 for March, the contract closest to delivery, fell $1, or 2.5 percent, to $40.17 a barrel on the New York exchange, while the April contract rose 39 cents, or 0.9 percent, to close at $46.15. The front-month contract also fell, while the second month rose, on Feb. 4.

A call to United States Commodity Fund was not immediately returned.

Chavez Plans 12% More Oil as Project Costs Rise, Credit Freezes

Venezuela plans to boost oil output at least 12 percent in a joint venture with foreign investors that will cost more than twice what the government previously estimated, a confidential document shows.

The project would increase Venezuela’s daily output of 3 million barrels a day by 400,000 barrels a day within seven years, according to the document, which was obtained by Bloomberg News. The project would cost $18.4 billion, the report says, up from Energy and Oil Minister Rafael Ramirez’s June estimate of $8 billion.

The new estimate follows a 76 percent drop in oil prices from record highs in July and decisions by companies to delay exploration and drilling efforts from Canada to Kuwait amid the global credit squeeze. State-owned Petroleos de Venezuela SA wants the project and two others in the Orinoco oil belt to be the government’s first ventures with outsiders since President Hugo Chavez nationalized crude assets in 2007.

“It will be very tricky for companies, big or small, to get that level of funding,” said David Thomson, a Latin America energy analyst for Wood Mackenzie in Edinburgh. “Even if there wasn’t a credit crunch on, raising $10 billion to $20 billion for Venezuela wouldn’t be the easiest.”

Given past nationalization moves by Chavez, a self-avowed revolutionary socialist, Thomson said, “Banks aren’t going to touch it with a bargepole.”

Energy Ministry

The document, marked confidential, was posted on and later removed from a Web site, fajadelorinoco.com, that the government uses to provide information to possible partners. Dated Feb. 6, it is described as a preliminary development plan for the last of three Orinoco projects announced by Ramirez in June.

Eulogio del Pino, president of Corp. Venezolana de Petroleo, said in a text message that the document is authentic. His company is a unit of Petroleos de Venezuela, also known as PDVSA.

The costs include $4.41 billion for drilling, $2.2 billion for steam injection to increase production and $6.51 billion for equipment to convert that region’s tar-like oil into a free- flowing, low-sulfur crude oil for export, according to the plan. The project is located in the Carabobo area of the Orinoco belt, about 450 kilometers (280 miles) from Caracas.

Venezuela aims to produce 4.94 million barrels a day by 2013. On Oct. 30, PDVSA opened bidding to find partners for the ventures in the Orinoco, which rivals Saudi Arabia’s reserves and Canada’s tar sands among the biggest petroleum deposits.

The country is seeking billions of dollars as oil companies including Marathon Oil Corp. and Hess Corp. rein in spending because of slumping prices and demand. Oil has dropped more than $100 a barrel from a record high of $147.27 a barrel on July 11.

Exxon Mobil

Exxon Mobil Corp., the largest U.S. oil producer and ConocoPhillips, the third largest, are banned from bidding after pursuing arbitration against Venezuela over assets seized by Chavez’s government in 2007. Exxon wrote off $750 million and Conoco $4.51 billion.

Italy’s Eni SpA settled an arbitration case a year ago to regain access to the country’s oil fields.

“Investors and suppliers will be very cautious of investing in a country where the private sector is being squeezed out,” said Gianna Bern, president of Brookshire Advisory and Research Inc., an energy economics and corporate finance research company in Flossmoor, Illinois.

Venezuela Production

Venezuela said it produces 3 million barrels a day of oil. According to a Bloomberg News survey of oil companies and analysts, output has fallen to 2.15 million barrels daily, from 2.61 million barrels in 2004. In 2003, PDVSA forecast that it would be producing 4.4 million barrels a day by 2008.

The country reaped $34 billion in royalties and taxes in the first nine months of 2008, more than half the national budget. Such funds have enabled Chavez to provide education, health care and low-cost food for what he terms the “Bolivarian Revolution” social movement in Venezuela.

Oil Rises for the First Time in Three Days as U.S. Dollar Drops

Crude oil rose for the first time in three days as the U.S. dollar weakened against the euro, boosting the appeal of commodities used to hedge against inflation.

Crude gained as speculation Europe will take steps to address the financial crisis lifted the euro against the U.S. currency, making dollar-priced crude appear cheaper. The American Petroleum Institute said yesterday inventories rose 1.6 million barrels last week to 345.8 million barrels. An Energy Department report due today is expected also to show stockpiles gained.

“The most important reason today is the dollar is showing some weakness against the euro,” said Eugen Weinberg, a Commerzbank AG analyst in Frankfurt. “There will always be a link between the two.”

Crude oil for March delivery rose as much as 81 cents, or 2.3 percent, to $35.43 on the New York Mercantile Exchange. The contract traded at the price at 9:50 a.m. London time. Prices are down 21 percent this year.

March trading ends tomorrow. The more-active April contract was at $38.27 a barrel, up 86 cents, at 9:51 a.m. London time. Brent crude oil for April settlement was at $40.49 a barrel, up 94 cents, on London’s ICE Futures Europe exchange at 9:52 a.m. London time.

The Energy Department report may show that U.S. stockpiles increased 3.2 million barrels last week, according to a Bloomberg News survey of analysts. That would be the 19th time in 21 weeks inventories climbed.

Inventory Reports

The API said on Feb. 10 that U.S. stockpiles fell 1.99 million barrels in the week ending Feb. 6. The Department of Energy followed on Feb. 11 with a report that said inventories gained 4.7 million barrels over the same period.

The Energy Department is scheduled to release its weekly report today at 11 a.m. in Washington, a day later than usual because of the Presidents Day holiday.

The euro rose from near a three-month low against the dollar on speculation German Chancellor Angela Merkel will signal Europe’s largest economy plans to take action to help ease the financial turmoil in the region.

“Markets seem to be bottoming out for the time being and there’s support this morning from the weaker dollar and some stabilization on the equities side,” said Robert Montefusco, a broker with Sucden Financial Ltd. in London. “The market could easily reverse later when the inventories come out.”

Europe’s single currency climbed to $1.2663 as of 9:52 a.m. in London from $1.2530 late in New York yesterday, when it touched $1.2513, the lowest level since Nov. 21.

Kuwait Petroleum Says Rotterdam Refinery Fire Is Out

Kuwait Petroleum Corp., the state- owned oil and refining company, said a fire in a desulfurization unit at its Europoort refinery in Rotterdam has been put out.

The fire brigade gave the all-clear at 2 a.m. local time and the affected part of the refinery has been taken out of operation, the Kuwait-based company said in an e-mailed statement.

“At the moment, unaffected parts from the refinery are still on line,” plant manager Ian McConnell said in a phone interview today. He declined to comment on whether force majeure would be declared on any shipments.

The damage was limited to one unit, spokesman Aad Polak said in a telephone interview today. Kuwait Petroleum has several desulfurization units in Rotterdam, he said, adding that the company can switch between these facilities “to some extent.”

It is too early to assess the exact damage and how long repairs may take, Polak said. He declined to comment on the effect of the fire on the refinery’s capacity.

Kuwait Petroleum notified the fire brigade of the blaze at 8.45 p.m. local time, said Remco Spaninxs, a spokesman for the police in the Rotterdam-Rijnmond area yesterday.

The fire occurred in a gasoil desulfurization unit, which Kuwait Petroleum had planned to shut down for normal maintenance, Spaninxs said. “It could be that something went wrong in that process,” the police spokesman said. “The part of the plant that is affected will burn down completely.”

An investigation into the cause of the fire has been started in cooperation with the authorities, Kuwait Petroleum said in the statement today. The company will study whether the accident was linked to scheduled maintenance, Polak said. The Rotterdam refinery has the capacity to process 79,500 barrels of oil a day.

Oil Falls to Lowest in 7 Weeks on U.S. Supply Gain

Crude oil fell to the lowest close in more than seven weeks in New York on concern inventories will extend increases as demand drops.

Supplies have gained in 18 of the past 20 weeks, leaving stockpiles the highest since July 2007, the Energy Department said. World oil consumption will drop 1.7 percent to 84.3 million barrels a day this year, consultant Wood Mackenzie said in a report today. The Energy Department and International Energy Agency cut their demand forecasts earlier this week.

“Inventories keep increasing and we continue to get reports downgrading demand forecasts,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “There’s increasing pressure on crude oil, especially the front month.”

Crude oil for March delivery fell $1.96, or 5.5 percent, to $33.98 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 19. It was the fifth consecutive daily decline. Oil is down 24 percent this year and 63 percent from a year ago.

The discount of West Texas Intermediate, the grade that’s traded in New York, to London’s Brent widened to a record $10.67 a barrel today after supplies at Cushing, Oklahoma, rose.

Brent increased after Royal Dutch Shell Plc said it may miss deliveries of oil from Nigeria because of security concerns. The oil for March settlement climbed 37 cents, or 0.8 percent, to $44.65 a barrel on London’s ICE Futures Europe exchange. March futures expired today. The more-active April contract gained 71 cents, or 1.6 percent, to close at $46.03 a barrel.

Cushing, Oklahoma

Supplies at Cushing, where WTI is stored, climbed 1.7 percent to 34.9 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.

“Cushing supplies have got to drop before we see the price of WTI recover,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington.

Prices for delivery in future months are higher than for earlier ones, a situation known as contango, allowing buyers to profit from hoarding oil. The price of oil for delivery in April is $8.19 a barrel higher than for March. December futures are up $19.89 from the front month.

“There was another big increase at Cushing, putting more pressure on the front month,” Bentz said. “In December prices reached a low of $32.40, and it looks like we are going to test it again soon.”

December Low

Futures touched $32.40 on Dec. 20, the lowest since February 2004. Traders rushed to sell January futures on that date because the contract expired at the end of the session. March futures in New York will expire on Feb. 20.

Volume in electronic trading on the exchange was 648,177 contracts as of 3:16 p.m. in New York. Volume totaled 713,756 contracts yesterday, 39 percent higher than the average over the past three months. Open interest yesterday was 1.24 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

The International Energy Agency yesterday reduced its global oil demand forecast for this year, projecting consumption will decline by 1 million barrels a day, the biggest drop since 1982. It’s the agency’s sixth consecutive reduction of its 2009 consumption estimate.

“We simply have way too much oil,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “The only thing that gives oil a jolt is when the stock market rallies.”

Stimulus Insufficient

President Barack Obama’s stimulus plan will be insufficient to avert the biggest U.S. economic decline since 1946 as consumer spending posts its longest slide on record, according to a monthly Bloomberg News survey. The world’s largest economy will contract 2 percent this year, half a percentage point more than last month’s forecast, according to the survey.

“There’s a lot of skepticism about the stimulus program,” said Adam Klopfenstein, senior market strategist for Lind-Waldock in Chicago, a division of MF Global Ltd. “The IEA revised global demand lower yesterday and inventories increased more than was expected. This is a fundamentally bearish setup.”

The Organization of Petroleum Exporting Countries will cut shipments by 3.5 percent in February, the biggest monthly drop in at least five years, as the group implements a record production reduction to bolster prices, according to tanker-tracker Oil Movements.

Crude oil prices won’t rebound to the $70 level until the OPEC production cuts are reflected in falling inventories, Ronald Brenneman, the chief executive officer of Petro-Canada, the country’s fourth-largest oil company, said in an interview in New York.

US oil rises above $34 per barrel

US oil prices rose above $34 a barrel on Friday, snapping a five-day losing streak, as a late rally in US stocks on news that the US government was working on a mortgage plan for troubled homeowners helped lift sentiment.

But lingering worries that the global economic downturn is taking its toll on oil consumption limited oil's gains.

US crude for March delivery rose 51 cents or 1.5 per cent to $34.49 a barrel, after falling $1.96 in the previous session to settle at $33.98 a barrel, the lowest since Dec. 19.

London Brent crude dipped 4 cents to $45.99 a barrel, extending a rare premium over US crude to more than $11, because of a glut at the main US storage hub in Oklahoma and supply problems in Nigeria that tend to have a bigger impact on European supplies.

"The US stimulus plans may be helping to boost market sentiment but the movement in oil prices this morning is still relatively moderate," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.

US oil prices have lost about 14 per cent this week and are languishing at a three-week low, pressured by persistent demand worries and doubts over the efficacy of the US government's banks rescue plan.

Oil's losses on Thursday were exacerbated by news that the number of people staying on unemployment benefits in the United States rose by 11,000 to a record 4.810 million in the last week of January.

"Concerns about consumption weakness and the build-up in crude stocks in Cushing will continue to weigh on markets," Moore said.

In the short term, analysts believe the market's direction would be influenced by movements in stock markets.

News that the Obama administration was working on a programme to subsidise mortgage payments for troubled homeowners renewed hopes the host of measures could pull the world's largest economy out of its steep tailspin, sparking a late US stocks rally.

Asian stocks excluding Japan rose 1.6 per cent on Friday, with the Nikkei up 2 per cent and Australia's resources-laden index gaining 1 per cent.

Investors have their eyes peeled on developments in the United States, as Democratic leaders in the US Senate and House of Representatives wrapped up a last minute tax cut and spending details in the economic stimulus bill, setting votes for Friday by both chambers.

Algerian Oil Minister Chakib Khelil said on Thursday that there was a 50 per cent chance the cartel could agree to deepen cuts when it meets in March, and said that compliance among members was solid.

"We have 85 per cent which is unusual for compliance. By meeting time, we will probably have 100 per cent," Khelil said.

IOC sees $12 bln revenue loss this fiscal

MUMBAI - State-run fuel marketing firm Indian Oil Corp's revenue losses on fuel sales for the current fiscal year will be 590 billion rupees ($12.1 billion), its chairman said on Thursday.

IOC is making profits on sales of petrol and diesel, but is still incurring a loss on cooking gas and kerosene, Chairman Sarthak Behuria told reporters.

IOC is losing 77 rupees of revenue per cylinder of cooking gas sold, and 12 rupees for a litre of kerosene, but is making 1.60 rupees per litre of petrol it retails and nearly 3 rupees on a litre of diesel, he said.

Overall the firm was losing about 50-60 million rupees per day, Behuria said.

In India, state-run oil marketing companies are made to sell fuel at government-controlled prices to keep inflation in check and help poor and middle-class households.

These firms are compensated by way of oil bonds from the government, while state-run upstream oil companies such as Oil & Natural Gas Corp sell them heavily discounted crude.

IOC, the country's largest state-run refiner, plans to import 46 million tonnes of crude oil in the fiscal year 2009/10.

PC sales bit by slowdown bug

Reduced spend on IT across enterprises along with a negative consumer buying sentiment is taking its toll on the overall PC market. According to the figures released by industry body, Mait, PC sales during April to September 2008 crossed 36.9 lakh units, registering an increase of 12% compared to the same period last year, but down 9% sequentially (October to March period of 2008).

As per the forecast by Mait, PC sales for the full financial year 2008-09 are expected to be almost flat at 7.3 million units. Mait had earlier projected PC sales for the current financial year to be at 8.5 million units. "The global economic downturn has started reflecting on the domestic IT market as evidenced in the recent October-December quarter. We expect a flat market for PCs for the fiscal 2008-09,"said Vinnie Mehta, executive director, Mait. As per the report, the total Internet users in the country have exceeded 54 million.

Between the first half of the fiscal (April-September), desktop sales stood at 29 lakh units, up 12% compared to the corresponding period last year. However, the desktop sales were flat sequentially. On the other hand, notebook sales were at 7.7 lakh units, an increase of 13% over the same period last year. Notebooks sales, however, declined by 32% sequentially.

The numbers for this period are an aberration from the trend for many years wherein the notebooks were registering a growth of over 100% y-o-y and desktop sales had almost flattened out. "This is probably due to the fact that people are opting more for desktops as they continue to be a cheaper option compared to notebooks,"said Mehta.

PC sales to enterprises increased by 24% while in households it declined by 6% over the same period last year. "Government and the public sector spending is expected to be the mainstay of domestic market IT consumption. Cost concerns are leading to significant consolidation of IT infrastructure in corporates with virtualisation gaining acceptance,"said Ravi Swaminathan, vice-president, Mait.

'Housing sector to see 30% price correction in 4 months'

The prices of houses have come down by up to 30% over the last four months but weak consumer sentiments continue to prevail resulting in subdued demand, says realty consultant Jones Lang LaSalle Meghraj (JLLM).

Affordability metrics for homebuyers have started to improve since October due to the sharp correction in property prices, reduction in mortgage rates and smaller unit sizes per apartment, it said.

"Currently, transaction prices in most markets are down by 25-30% across the board,"JLLM Chairman and country head Anuj Puri said.

Weak Deepawali sales last year and a "virtual standstill"in incremental credit lending during October-December period of the current fiscal have forced developers to mark down their asking rates, he added.

"Price corrections are more pronounced in new launches than existing projects, which are mostly sold to end-users or investors and hence are cost covered,"Puri said.

He, however, said demand of housing properties still remain subdued with end-users postponing their home-purchase decisions given an uncertain job market and expectation of further price corrections.

The consultant said though many developers have shifted their focus towards building affordable houses in the last few months, but due to thin margins on account of high costs of existing land inventories (mainly acquired over 2006-08) and the current level of construction costs, companies are finding it difficult to remain afloat.

"JLLM expects Rs 1,800-Rs 2,000 per sq ft as the bare minimum pricing level in the current market,"Puri added.

Oil hovers above $36, demand worries nag; eyes U.S. data

PERTH - Oil held above $36 a barrel on Thursday, pausing after steep overnight losses, as lingering worries over the health of the global economy and forecasts for a hefty fall in global energy demand weighed on sentiment.

Most Asian markets slid on Thursday despite the U.S. Congress having reached a deal on $789 billion in new spending and tax cuts on Wednesday, with investors remaining wary about the global economic outlook.

Investors will now train their eyes on U.S. weekly jobless claims and January retail sales data due later in the day, which will give a clearer indication of how the U.S. economy is faring.

U.S. light crude for March delivery crept up 11 cents to $36.05 a barrel by 0655 GMT. The contract settled down $1.61, or 4.3 percent, on Wednesday.

London Brent crude rose 75 cents to $45.03, stretching its rare premium over U.S. oil to near record levels of above $9 hit last month.

"The market isn't too impressed by the stimulus package. After all the bearish data last night, it's pretty obvious that global energy demand will taper off quite quickly," said Michelle Kwek, an analyst at Informa Global Markets in Singapore.

"The underlying fundamentals for oil remain week and it's unlikely that we'll see any economic recovery in the near term."

Oil has tumbled around 10 percent this week, having fallen four sessions in a row since last Friday, on demand worries and fears the U.S. bank rescue plan would not go far enough to revive the ailing financial sector.

Oil prices took a battering on Wednesday after the U.S. Energy Information Administration said domestic crude stocks had ballooned 4.7 million barrels to 350.8 million in the week to Feb. 6, against a forecast for a rise of 3.1 million.

The latest increase in U.S. crude stocks comes on the heels of a combined rise of more than 13 million barrels in the prior two weeks, and crude inventories are now moving significantly above their five-year range, BNP Paribas said in a report.

Oil's losses were further exacerbated by a separate report from the International Energy Agency forecasting global demand to contract by nearly a million barrels per day (bpd) -- the most since 1982 -- to 84.7 million bpd in 2009.

Underlining the damage caused by the global financial crisis, data showed global trade activity in goods and commodities had tumbled.

The United States reported a fifth straight monthly fall in exports and imports in December, while China's January exports fell 17.5 percent from a year earlier, a sharp acceleration from a 2.8 percent dip in December. Imports plummeted 43 percent, twice as much as in the previous month.

Don't take restraint as weakness: India to Pak

Defence minister AK Antony, while pointing that ''responsible elements'' from across the border sponsored the 26/11 Mumbai attacks, said, ''our restraint should not be construed as a sign of weakness.''

Dismissing suggestions that the government's 'meek response' to the attacks were due to Pakistan possessing nuclear weapons, he said it was ''nothing like that'' and that India was capable of meeting ''all challenges'' at all times.

''We are still pursuing the diplomatic option, but that is definitely not any indication of our weakness,'' he told the mediapersons in Bengaluru.

Pointing that the 'assault' indeed compelled the government to speed up the modernisation process of defence and security forces along with the intelligence network in the country, the defence minister said ''the attack made us more vigilant and has ever since kept the armed forces in a state of preparedness.''

''Despite mounting world pressure and credible evidence of Pakistani elements' involvement in the dastardly Mumbai attacks, even after more than two months there was no real improvement in the situation in our vicinity.''

It was because of this that modernisation of the forces ''at the earliest'' was a necessity, he said and that the security scenario around the country was not very encouraging.

The minister also trashed the Chinese propaganda that it ''forced'' an Indian submarine to surface in the Gulf of Eden last month after it was found snooping on two of its warships. On the Admiral Gorshkov deal with Russia, Antony said the price negotiations on buying the ship were still on.

Ford, Centex would be winners under US Senate stimulus bill

Ford Motor Co and Centex Corp., the second-largest US homebuilder by sales, would be among the biggest winners under the $838 billion stimulus measure the US Senate is poised to pass on Tuesday. The Senate is more generous to automakers and homebuilders than the House was in the $819 billion measure it passed last month. Alternative-energy companies and closely held builders such as Sundt Construction Inc. in Tempe, Arizona, fare less well under the Senate bill.

President Barack Obama, who has said he wants stimulus legislation on his desk by the weekend, is counting on the plan to help revive an economy that has lost 3.6 million jobs since December 2007, sending the unemployment rate to the highest level since 1992.

The plan would trigger the biggest burst of public works spending since the interstate highway system was started in the 1950s.

Where the money goes will help shape the fortunes of companies and communities, said Rogan Kersh, associate dean of New York University's Wagner School of Public Service. "In a bill this big, there are countless private-sector winners and losers," Kersh said. The Senate cleared a procedural hurdle yesterday by voting 61 to 36 to end debate on the measure, with three Republicans siding with Democrats. Senate approval of the bill today would force the two chambers to work out their differences.

Ford, General Motors Corp. and Chrysler LLC, along with overseas-based rivals that produce vehicles in the US, would benefit from an $11 billion provision in the Senate bill that would let car buyers deduct interest on auto loans and local sales taxes from their income taxes. "Tax deductions on auto loans are very beneficial to a customer," Mark Fields, Ford's North American chief, told reporters on Feb 4.

CIL invites bids for e-tenders, reverse auction

In a bid to streamline its procurement policies, Coal India is likely to introduce electronic tendering and reverse auction. The company along with its eight subsidiaries has planned procurement of equipment, consumables, spare parts and other stores of worth Rs 35,000 crore in next five years.

CIL has invited tenders inorder to select and appoint suitable service providers, who facilitate electronic tendering and reverse auction via a customised and secured public platforms for one year. Four options e-tendering with e-price bids, e-tendering with e-price bids followed by reverse auction, e-tendering with reverse auction and bare reverse auction are likely to be weighed during the selection process.

According to sources, the service provider would host the e-tendering, e-procurement and reverse auction platform from a portal on his server. Also, he would operate and maintain it at his own cost during the currency of the contract. For e-tendering with e-price bids and e-tendering with e-price bids followed by reverse auction, annual procurement of various items would be worth Rs 2,000 crore.

Moreover, for e-tendering with reverse auction or for bare reverse auction, the annual procurement value is estimated to be Rs 1,400 crore.

According to the bid document, the bidder must have an experience of having successfully executed similar work against one contract for providing services for conducting electronic tendering and reverse auction for procurement of goods of total value of Rs 2,720 crore or having executed similar contracts of Rs 1,700 crore. Besides, the bidder should have executed similar work against three contracts for providing services of conducting electronic tendering and reverse auction for procurement of goods worth Rs 1,360 crore during the last 7 years ending last day of the month previous to the one in which bid applications are invited.

Siemens bets on the building automation market in India

Siemens Building Technologies Ltd (SBT) is betting big on the building automation, energy efficiency, and fire and safety solutions market in India, estimated at Rs 2,000 crore. The company is setting up a "first-of-its-kind" Graphics and Engineering Centre of Competence (GECC) for the Asia Pacific region in India to pursue business opportunities in the building automation segment, said Andreas Schierenbeck, CEO, building automation, Siemens.

The company, incidentally, invested over $200 million into its India RandD centre during the previous year. It sees India as the major market for its building technologies business arm in the years to come, said Schierenbeck, during a press conference here on Tuesday.

The GECC, being set up in Chennai, will provide engineering design services for the Indian market as well as the Asia Pacific region, and thus serve as a key contributor in Siemens' global value chain, he noted. Siemens has its main GECC centre in Europe.

SBT, which has got orders from seven Indian airports to provide building automation and energy efficinecy solutions, is looking at the oil and gas, pharmaceutical, healthcare, green buildings and hotels sector for its SBT business. Apart from engineering design, software configuration and graphics development services, the new centre will enable Siemens to improve the quality and speed of delivery of their building technology solutions, opined Schierenbeck.

Anand Mecheri, CEO and managing director, SBT, said, "The Indian fire safety, security and building automation market is estimated at Rs 2,000 crore (excluding old buildings) and is set to grow manifold with the advent of new hotels, IT and ITeS and green buildings. Given our expertise and experience, coupled with our innovative product solutions, we see huge opportunities for our SBT business in the years to come," he added.

According to him, the GECC will initially have 30 people, which will be scaled up to 100 over a period of time.

Siemens, which has a manufacturing facility for control equipment at Puducherry, will help in sourcing required products, he said. Currently SBT's turnover is estimated at around Rs 325 crore, including business worth Rs 100 crore from its manufacturing unit, said Mecheri.

CERC proposals on equity returns evoke mixed reactions

The Central Electricity Regulatory Commission's (CERC) proposal to increase return on equity to 15.5% from 14% in the tariff regulation for 2009-14 has evoked mixed reactions. Private entities like Power Dodson LHPL, Energy Infratech, Avanta Power, CESC and Torrent Power, have proposed a post-tax rate of return on equity of at least 16%, considering the financial markets.

On the other hand, beneficiaries like GRIDCO, UPPCL, GUVNL, BSEB and KSEB have objected to providing a higher return on equity to the utilities. They feel the CERC should review all the benefits available to the utilities along with return on equity and permit the recovery of cost of electricity at a reasonable manner. Some of the consumers have even proposed to reduce the return on equity from 14% to 12%. UPPCL and MPPTCL have proposed a pre-tax rate of return of 14% for the new projects and 19% for the existing ones.

However, the CERC has said it has the mandate to fix a rate of return for equity that will not only attract investment and generate sufficient resources for further growth in the sector but also take care of consumers' interests. Considering the investment pattern of 70:30 debt-equity, utilities are required to build up sufficient internal accruals to meet the target of investing at least 30% of capital cost in the form of equity. A higher investment in the form of equity will also help the entities in negotiating and availing loans at competitive terms and conditions.

The CERC has also made it clear that the return on equity will be computed in rupee terms, on the equity base determined in accordance with regulation 12 and will be computed on pre-tax basis at the base rate of 15.5%, to be grossed up according to clause (3) of this regulation.

NHPC has proposed to allow depreciation at 5.83% for the first 12 years and spread over the balance depreciable value of the assets over the balance useful life of the assets at 1.09%. SJVNL had advocated for a depreciation of 5.28% and also proposed to allow depreciation against the land for reservoir in case of a hydrogenerating station. Companies like PGCIL, NTPC, Gujrat Industries SEDCL, Universal Infratech, India Energy Forum and NTPC have proposed rates of depreciation as prescribed in the Companies Act, 1956.

Aero India to fly high with top US firms

With a renewed vigour in Indo-US relations since the signing of the civilian nuclear deal, American aerospace companies will be the largest participants at the forthcoming Aero India-2009 international air show beginning on Wednesday.

According to senior US officials, "The US will be the largest participant at Aero India 2009 in terms of space taken up to showcase an array of military and civilian aircraft for static and flying displays. With a huge contingent, our presence will be larger than at any previous Indian air show." Companies, including Lockheed Martin, Boeing, Northrop Grumman, Raytheon, General Dynamics and Bell Helicopter, with their fleet of fighter jets, transport planes, helicopters, hi-tech equipment and products will be a major attraction and show of strength. "Besides senior military leaders, defence department officials and top officials of the major aerospace companies would be participating in the show."

It maybe pointed out that Lockheed's F-16 and Boeing's F/A-18F Super Hornet are in a race to win the Indian Air Force (IAF) contract for 126 medium multi-role combat aircraft (MMRCA).

The two are in competition with the Eurofighter Typhoon of EADS (European Aeronautic Defence and Space), Gripen of Saab, French Rafale of Dassault and Russian MiG-35 of MiG for the $10-billion IAF order for the 126 MMRCA.

In an official statement, issued earlier, Boeing India president Ian Thomas said, "India's growing aero-space and defence industry offers significant opportunities for growth and productivity. Our participation will underscore our commitment to India and foster stronger ties with our Indian customers and partners."

Recently, secretary defence production, Pradeep Kumar had said the global meltdown would not impact India's military modernisation and reassured the global aerospace industry of the market potential in the sub-continent.

The Boeing exhibit will also feature models of its commercial jets such as 787 Dreamliner, planes of the 777 family, the 747-8, freighter series and the next-generation 737 family, besides a range of products and services. Another aerospace major, Lockheed Martin, which has bagged the $1-billion order for six C-130J Super Hercules aircraft for the IAF in early 2008, has roped in Indian ace shooter and Olympics gold medallist Abhinav Bindra to fly in the F-16 at the air show.

Oil steady above $40, U.S. stimulus and OPEC support

PERTH - Oil paused from its decline and stayed above $40 a barrel on Monday, as hopes that the United States would act swiftly to approve a economic stimulus package this week outweighed demand concerns.

Tough talk from the Organization of Petroleum Exporting Countries (OPEC) that it would cut output again if needed at its March meeting, violence in Nigeria and renewed tensions between Iran and the West also lent support.

U.S. crude for March delivery edged up 3 cents to $40.20 a barrel in Globex electronic trading by 0641 GMT. The contract fell $1 to settle at $40.17 a barrel. London Brent fell 1 cent to $46.20.

"Hopes of the U.S. stimulus package being approved this week are giving some underlying support. The market is adopting more of a wait-and-see approach now partly because the jobs data on Friday has dampened sentiment," said Mark Pervan, commodities analyst at Australia & New Zealand Bank.

Top aides to President Barack Obama on Sunday urged Democratic and Republican lawmakers to set aside political differences and quickly approve a massive economic stimulus package this week, as the world's largest economy suffers from the worst financial crisis in 70 years.

Oil's fall on Friday was triggered by news of steep job cuts in the United States, where nearly 600,000 jobs were slashed last month, the most severe cut since December 1974, prompting worries of still weaker demand in the world's biggest oil consumer.

The financial malaise, which first sprung from housing mortgage defaults in the United States, has swiftly spread to Europe and Asia, throwing a string of industrialised nations into recession.

The economic slowdown has shaved energy demand around the world, causing prices to plummet more than $100 from a peak of near $150 struck last July.

OPEC will take whatever action is necessary to balance the oil market when it next meets on March 15, the group's president said in a statement on Friday.

OPEC sources have indicated the group could cut a further 1 million bpd from output when it next meets, adding to the 4.2 million bpd in cuts announced since September.

Renewed violence in Nigeria also helped buoy oil prices. Nigerian militants attacked a gas plant operated by Royal Dutch Shell in the Niger Delta on Saturday and warned of more attacks to come, but the army said it had repelled the raid and killed three gunmen.

On the geopolitical front, Western powers said on Saturday Iran risked isolation and more sanctions if it did not comply with demands to rein in its nuclear programme, but Washington also reaffirmed its offer for talk with Tehran.