Kalistani Major History

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As Steel Glut heats up, KNF Futures Nosedive into Negative Territory
6 month contracts bounce out at K -123 before volatility forces Stock to be suspended
Kaliburg, Ananto
July 3, 4901


KNF in Freefall following Trade Ministry Announcement of met production targets

A day like none other ever seen in the Kalistani Stock Index began among news of the heating up Steel crisis between Kalistan and Yingdala. It was only last January when Trade Minister Martinez announced the policy of the Government of Kalistan was to begin putting Kalistani steel at substantial discount onto the world Market. "We've been able to achieve discounts of up to 25% in direct sales," said Martinez at a news conference at around Noon in Kaliburg, "further driving the international price of the strategic commodity down. And we have excellent numbers from the First two quarters showing that the Steel Industry has exceeded the 45 million tonne production targets for the first half of this year in early June and proceeded to process and finish another 3 million tonnes on top of that, setting Kalistan up for production of close to 100 million tonnes of steel in just this year.

"The main bottleneck, of course besides exploitable raw materials," continued the Trade Minister, "which will always serve as a break on Kalistani production, is storage capacity. We have been able to quickly increase our warehouse storage space, but it appears that until some of these major contracts start maturing, we will be nearly out of storage for additional capacity, and will have to take additional steps to encourage direct sales in Sulari."

The news of the lack of storage combined with the exceeding of production targets had an immediate effect on the speculative market. While one month and three month contracts held steady, and even made modest gains, the six month futures market immediately began collapsing, driving KNF futures into a tail spin and causing a general decline in the Kalsie over all. "We're watching KNF futures very closely" said Martinez around 1:30, when KNF entered freefall. More troubling to the Minister though was the fluctuation in the KRB on international Markets. Around 2:00, as KNF futures entered negative territory, Martinez went back in front of cameras.

"For the first time, KNF futures have crossed into negative territory. This unprecedented event is a result of reports that I myself made about storage capacity over the next six months. I think perhaps some of those comments were misinterpreted by investors to mean that the Republic was done building warehousing facilities for our production. The construction continues to warehouse the steel to meet six month contracts, but as it is, those contracts have not begun to even be filled yet, and by the time they are due, there will be adequate storage for the commodities in Sulari. But more troubling to us is the fluctuation of the Ruble overseas. Given the lack of convertibility of the KRB, we have seen its demand experience more volatility, specifically in terms of upward pressure on price against the main index currencies, and this could signal a whiplash effect in the currency markets. We have asked the Economic Minister to begin instituting capital controls over the Scrip to begin to address some of this volatility, and will keep the Republic informed on our efforts as we go through the coming weeks and months."

An increasing price of the Ruble means that the Ruble is worth more to foreign buyers, but if not carefully managed, could lead to deflation in prices, difficulty with exports in other, non-nationalized sectors, and an economic contraction in Kalistan. The Trade Minister was careful to point out "Kalistan is not at this point, and with capital controls in place, we will be able to forestall any possibility of contraction for a very long time. Currency Controls are a very mild form of downward pressure that the Republican Bank can engage in to counteract increased demand overseas, and will allow the Republic to continue to pursue our doctrine of zero growth in the Kalistani Economy, despite the spike in both production and employment the Ferrominerals Sector."

Directly following the conclusion of the Minister's conference, KNF futures bottomed out at around K-123, and then rebounded. The more than 10 percent drop followed by a sharp rise triggered volatility controls in the Kalsie, which suspended trading in KNF futures for 24 hours, but given that this drop occurred on Friday, KNF will have a two day cooling off period. Speculators expect KNF to open with a correction to about K720 when trade resumes on Monday. Due to the sharp drop in Steel Futures, the Kalsie as a whole finished down 4.65%, one of the worst trading days since the Restoration of SP rule in Kalistan in the late 4870s.