Session3 Sunder

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NCDEXNCDEX

Base Metals A Global PerspectiveBase Metals A Global Perspective

June 08, 2006


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Major Non Ferrous MetalsMajor Non Ferrous Metals

Copper

Aluminum

Zinc

Nickel

Lead

Tin


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Major ExchangesMajor Exchanges

LME AllCOMMEX Copper *SHFE Copper *KTE Tin

LME is synonym for Non Ferrous Metals

More than 90 % of physical trade is basedon LME prices

*Aluminium Contract not liquid


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Key DriversKey DriversCommodity fundamentals

Demand-Supply (growth) GapInventoryChina!

Economic factorsGDP GrowthIP GrowthOECD leading indicatorsPurchasing Managers Index

OthersFundsCurrency


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Base metals supply/demand summary

Source: Macquarie Research, February 2006

'000 tonnes % Change Y-o-Y2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008

Copper Production 15306 15936 16670 18064 18981 19916 -0.4% 4.1% 4.6% 8.4% 5.1% 4.9%Consumption 15608 17061 16942 17915 18692 19634 3.8% 9.3% -0.7% 5.7% 4.3% 5.0%Balance -302 -1126 -272 148 289 282

AluminiumProduction 28040 30013 31947 33653 35100 37730 7.8% 7.0% 6.4% 5.3% 4.3% 7.5%Consumption 27876 30246 31738 33758 35160 37603 9.0% 8.5% 4.9% 6.4% 4.2% 6.9%

Balance 164 -233 209 -105 -60 127

ZincProduction 9821 10116 10133 10677 11442 12432 1.9% 3.0% 0.2% 5.4% 7.2% 8.7%Consumption 9668 10334 10420 11095 11575 12369 3.3% 6.9% 0.8% 6.5% 4.3% 6.9%Balance 153 -217 -287 -418 -133 63

NickelProduction 1203 1260 1292 1341 1408 1529 2.6% 4.8% 2.5% 3.8% 5.0% 8.6%

Consumption 1243 1264 1260 1342 1406 1496 6.2% 1.7% -0.4% 6.5% 4.8% 6.4%Balance -40 -4 32 -1 2 33

LeadProduction 6782 6833 7237 7631 8023 8337 2.0% 0.7% 5.9% 5.4% 5.1% 3.9%Consumption 6829 7067 7382 7668 7945 8228 2.8% 3.5% 4.5% 3.9% 3.6% 3.6%Balance -47 -234 -144 -37 78 109


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How big is this bull market?How big is this bull market?

This is only the fourth major bull market for the metals in thepast 40 years.

In terms of scale, it is similar to the late 80s bull market.

The IMF metal price index: Cu, Al, Zn, Ni, Sn, Pb Fe and

uranium.

IMF Metal Price Index - Nominal Terms

20

40

60

80

100

120

140

160

1 9 5 0

1 9 5 5

1 9 6 0

1 9 6 5

1 9 7 0

1 9 7 5

1 9 8 0

1 9 8 5

1 9 9 0

1 9 9 5

2 0 0 0

2 0 0 5

I M F M e t a l P r i c e

I n d e x - n o m

i

Source: IMF, Macquarie Research


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Market inventories extremely lowMarket inventories extremely low

In the late 1980s, market inventories stayed at critically tightlevels despite slowing economic growth this is what supportedprices thenand now.

Base metal stocks and prices (nominal)

300

800

1300

1800

2300

2800

1 9 7 3

1 9 7 4

1 9 7 5

1 9 7 6

1 9 7 7

1 9 7 8

1 9 7 9

1 9 8 0

1 9 8 1

1 9 8 2

1 9 8 3

1 9 8 4

1 9 8 5

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

L M E X P r i c e

I n d

3

5

7

9

11

13

15

17

e x c h a n g e

/ p r o

d u c e r s t o c

k s : w e e

d e m a n

d

Nominal Prices Exchange/Producer Stocks (Cu/Al/Zn/Pb/Ni) Stocks Trend

Source: Macquarie Research April 2006,


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Industrial growth bottomedout

OECD leading indicator points to an acceleration in growth rates in late 2005 andearly 2006.

Although the relationship between the OECD LI and metals prices is not as strong aspreviously (due to the influence of China on prices), this is still a positive sign for1H06.

Source: OECD, LME, Macquarie Research,

OECD Leading Indicator and W. World Industrial Production

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

80 82 84 86 88 90 92 94 96 98 00 02 04 06

W e s

t e r n

W o r

l d I P ( % C h a n g e

Y

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

L e a d

i n g

I n d i c a t o r

( 6 - M o n

t h R a

C h a n g e )

W. World IP Leading Indicator - Forward 6 Months

Source: Macquarie Research April 2006,


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Non-fundamental drivers:Non-fundamental drivers:Investment fund inflowsInvestment fund inflows

Around $80bnestimated to beinvested incommodity indexfunds at end 2005 upfrom around $55bn atend 2004 and lessthan $30bn at end2003.Industrial metals 720% of the total(depending on theindex).Prediction of fundgrowth to $110120bn by end 2006.

Total Commodity Index Funds

0

10

20

30

40

50

60

70

80

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

$ U S b

Source: Industry estimates, February 2006


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Commodity index funds weightings ineach commodity

Energy54%

Agriculture29%

Industrialmetals12%

Preciousmetals

5%

Industrial MetalsWeightings

of Index funds

0%

10%

20%

30%

40%

50%

60%

70%80%

90%

100%

Aluminum4.2%

Copper 3.7%

Zinc 1.4%

Nickel 1.3%

Lead 0.7%

Average Commodity Sector Weightings of Index funds

Source: Macquarie Research, February 2006


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Commodity Bubble?Commodity Bubble?


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Opportunity NCDEXOpportunity NCDEX

Localized Contract Specification, Trading locally in INR prices.

Small lots

Reflection of Realistic Domestic Demand

Arbitrage Opportunities

Encourage value-chain participants for

hedging


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SpecificationsSpecifications

Delhi

Bhiwandi

Rs.0. 100/- per KG

250 Kg +/- 2%

Rs Per Kg

250 Kg

Ex- Bhiwandi*

Nickel Zinc

BhiwandiDelivery Center

Rs Per KgQuotation

2000 Kg (2MT) Trading Unit

DelhiAdditionalDelivery Center

Rs.0. 100/- per KG Tick size

2000 Kg +/- 2%Delivery unit

Ex- Bhiwandi*Basis

* Excl of Excise /CVD, Cess & Sales tax)


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Thank You Thank You

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