Toamasina, Madagascar, 12th December, 2023:- As was happening in last two years, 2021 and 2022, this year also, CLOVE AGREEMENT, [clove export permit] was issued by the Ministry during 2nd half of November and 1st of December. Total 108 are in the list as of now. Further list in the waiting or not ???? Will have to wait and see !
CLOVE MARKET ! Clove is now purely an industrial agri commodity. And therefore, all sentiments of COMMODITY MARKET is applicable to Clove market as well. It is dynamic, speculative, beyond predictions and calculations and oiled by market makers, Speculators and forward sellers, stockists, and industrial buyers and finally by Circular Trading group as well. Clove market is now filled with forward sellers and speculators, who were not present in this trade one or two decades back. One can see that from the price chart. Zig Zag price chart came on Clove map only after the speculators and forward sellers coming into the market. What I offer here is only a traders perspective – not predictions.
India and Indonesia – the two major players in clove market. While Indonesia needs more than 120,000 Mt of clove for their cigar factories; India needs around 30,000 Mt for industrial use as well as domestic and consumer use. Indian production is less than 5000 Mt in total and import almost 24000 Mt annually from various origins. Where as Indonesia production was at 140,000 Mt which came down to almost 70,000 in the last two years. Trade figures shows that in 2022 Indonesia imported more than 12000 Mt from Africa. In 2023, till now, trader figures says, Indonesia already covered 9000 to 10,000 Mt which would be shipped during December 2023 to March 2024.
New harvest season in Indonesia is scheduled February 2024 – but reports are already coming out that it is delayed, and may be only by April – May 2024 full harvest would happen. Meaning thereby, February and March 2024, Indonesia may not have fresh harvest to the market ! The already covered 10,000 Mt would feed the cigarette factories till April 2024.
Currently Indonesia price is at USD 9.6 to 9.8 per kg. And cigarette factories have stopped buying at those levels from inside Indonesia; as they already covered 10000 Mt much much lower from Africa origins ! And thereby, now insiders in cigarette industries are now trying push down local price as well; and if local traders and farmers not supporting them with lower price; cigarette factories are already warned the local traders that factories would import lower priced material from Africa rather than buying local material at higher price ! All users need lower price !
And now it is reported, and expected Indonesia would have considerably good crop in March – April – May 2024 contrary to 2022 and 2023. And that is an easing factor for the price rally. 90,000 to 100,000 Mt is in the air by local traders expectation, but, it is too early to make any firm judgement; We have to wait till February-March 2024 to have a realistic idea.
If the crop would be more than 80,000 Mt in Indonesia – that would be sufficient enough to arrest the price rally !!
What is happening in India ? India already covered reasonably good quantity from Comor, and Tanzania, those stock already landed in India. And from September onwards, till now, India covered more than 5000 Mt at price ranging from USD 8150 to 8800 from Madagascar; which would be shipped during December and January and may be February also. [shipment from Madagascar was allowed only after issue of Export Permit, which happened on 1st December 2023 only]. Currently, I mean, after 1st December – India asking price is between 8200–8500 only. No importers are giving positive response to 8700 and 8800 levels; where as many are waiting to see the shipments of already covered quantity. And exporters are not positive to 8200–8500 levels to sell. However, few isolated exporters are signing contracts at 8300-8400 for limited container load as well. This is also a factor that can support the market on buyer side.
Singapore traders also covered more than 4000 Mt from Madagascar as of now [ from September onwards on forward sale]; and Zanzibar stock fully gone to Singapore only.
Now what are the possibilities and scenarios in the market?:- Xmas and New year holidays coming up. Trading activities and even shipments would be either stopped for few days or delayed or slowed down because of holidays. At the same time, farmers and local small scale traders in Madagascar needs money for Xmas and New Year and Holiday Celebrations. They would push sales. Vanilla season started in Madagascar; but prices are not attractive as of now. Hence, farmers sell pressure on clove could be expected. Only could be expected.
If Indian buyers not showing positive node to price levels of USD 8700–8800 and above, and if they do not buy at those levels, and if importers keep out of market during Xmas and New Year holiday period, then price has to come down only. Because many of the forward sellers are already covered their requirement [ please note, exporters started covering stock from August 2023 onwards at much much lower price and holding back stock] and if Indian buyers not showing interest at 8700-8800 levels to confirm new contracts now, then, exporters may not show much interest to cover new stock, which can also only cause easing down price temporarily. I say, temporarily. After the Xmas and New year holidays, when market re-open after 7th January 2024, we need to see how importers respond to the market. As Indonesia may not be in the import market at least till February March 2024, do not see any remarkable factor to push up the price during holidays.
