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4QFY11 iron ore contract prices up 6.3% QoQ, Indian HRC prices improve
Rio Tinto recently agreed to a 6.3% QoQ hike in iron ore price contracts with
Chinese mills for 4QFY11, in line with our expectations, highlighted last week.
China’s iron ore imports rebounded to 57.4mt (up 12% YoY) in November,
reaching their highest level since March 2010, which supported spot iron ore
prices. Iron ore prices on the spot market are firm at US$170/dmt for 63%
iron grade.
Indian HRC prices rebounded from their recent lows on account of a pick-up
in demand and due to a supply correction caused by a continued shut down
at Ispat Industries. Our interaction with industry officials indicates expectations
of gradual improvement in steel markets. With buoyant end-user demand in
India, steel producers are pushing for higher prices.
Scarp prices also surged globally in the past week, due to higher demand
from southeast Asia and the EU. This is expected to push steel prices higher
as producers will try to maintain margins.
Tata Steel recently received environmental clearance from the ministry of
environment and forests to expand capacity at the Katamati iron ore mine
from 2mtpa to 8mtpa. We are positive about Tata Steel India but expect
EBITDA to come under pressure at Tata Steel Europe in 3QFY11.
JSW Steel, Sterlite Industries, Tata Sponge and Prakash Industries trade at
attractive valuations
Ferrous
Long product prices (12mm Rebar,
Mandi) declined by Rs250 WoW
to Rs35,630/ton
Indian HRC prices increased by
Rs500 to Rs31,596/ton WoW as raw
material costs (coking coal, scrap
and iron ore) are on the upswing.
Domestic producers are increasing
prices in line with global players to
maintain margins. CRC prices have
also risen WoW
Prices of steel intermediates were
high due to high raw material prices
and shortage of DRI grade iron ore.
Scrap prices surged by Rs200 to
Rs21,940, in line with higher global
scrap prices. DRI prices however
were flat at Rs17,600/ton
Prices of 63% iron ore fines were
high in the past three months.
Barbil prices declined by 4% last
week to Rs2,450/ton due to a pick
up in ore production
EUROPEAN UNION
HOT ROLLED COIL PRICES IN EUROPE (EURO/TON)
HRC prices in the EU increased by
2% after consolidating at lower
levels in November. Raw material
prices are expected to squeeze
margins as global miners agreed to
a 6-8% increase in iron ore and
coking coal prices for the quarter
ending March 2011
Rotterdam shredded scrap prices
increased by US$10/ton (2.6%) to
US$398.5/ton last week as steel
capacity utilization is higher
in the EU
Long prices increased by 1.5-3%
last week despite lower demand
due to seasonal factors
Steel prices in China inched
up by 1-2% last week due to lower
supply from domestic producers on
emission targets and maintenance
shutdowns in this quarter
CHINA
Iron ore inventories increased by
2% to 76mt last week and steel
inventories declined by 1% WoW
to 6.8mt
CIS export prices were flat WoW.
Russian mills started raising offer
prices due to a raw material
cost push
Middle East HRC import prices were
steady WoW while Turkish billet
prices increased by 2% to US$585/
ton last week
North American domestic steel
prices surged 5.7% WoW to US$608
after trading in a narrow range of
US$560-580/ton in November
STEEL RAW MATERIALS
Iron ore spot (China CIF) prices
were firm at US$170 due to a tight
supply of medium-grade ore. On the
back of strong spot prices, Rio Tinto
agreed to a 6.3% QoQ increase in
1QCY11 iron ore quarterly contracts
with a few Chinese mills
Freight rates (from key iron ore
exporter countries to China)
were flat WoW
Chinese iron ore imports rebounded
to their highest level since March to
57.4mt (up 26% MoM and up 12%
YoY) in November. Net exports of
finished steel fell to a three-month
low of 1.53mt
Spot export prices of coke were firm
at US$385/ton last week. The RB
Steam Coal Index surged
4% WoW
FERRO ALLOYS
Chinese imports of manganese ore
and concentrates declined to 740k
tons in October. Manganese ore
prices declined 8.6% MoM to
US$222/ton
High grade manganese ore FOB
prices were flat WoW at US$7/MTU
and 40% met grade chrome ore
prices were also flat WoW at
US$235/ton
Ferro manganese prices were
flattish at US$1,500/ton and silico
manganese (65%Mn FOB China) fell
sharply to US$1,100/ton
High grade spot 6-8% Cr ferro
chrome prices were flat WoW and
low chrome content alloy prices
inched up slightly WoW to
8,700 yuan a ton
KEY INDICATORS
CHINA NEW LOAN GROWTH
China's new loan growth in
November declined 4% MoM
to 564b yuan
The Chinese PMI inched up to
55.2 in November 2010
Fixed asset investment improved
slightly in November (up 24.9% YoY)
The rupee depreciated to 45.24 per
US dollar from 44.65 per US dollar
WoW. It depreciated by 0.8 and
1.5% against the Euro and the
pound last week respectively
Non-ferrous Non-ferrous
ALUMINIUM: LME INVENTORIES AND PRICES
China's November alumina imports
declined 40% MoM to 270k tons.
The import price increased
4% MoM to US$359/ton
ZINC: LME INVENTORIES AND PRICES
LME zinc increased 3.8% WoW to
US$2,288/ton. Inventories also
declined by 2,100 tons last week
to 630,725 tons
COPPER: LME INVENTORIES AND PRICES
LME copper continued to rise as
inventories declined. Copper prices
increased 3.8% WoW to US$9,115/
ton as inventories declined by 2,750
tons to 348,625 tons
CHINA'S ALUMINA IMPORTS ('000 TONS) AND PRICES (US$/T)
LME aluminum increased 1.7% WoW
to US$2,316/ton as inventories
declined by 13,000 tons to 4.27mt
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