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While scrap prices surge seems to be peaking out (for
the time at least), HRC price surge continues
• Scrap prices peaking out? Long steel prices could hit near term ‘air
pocket', HRC price surge continues: Scrap prices after a sharp rally since
Nov, seems to be peaking out with recent transactions taking below MB index
price of $503/MT and as a result export prices of billets and re-bars from
Turkey have fallen by $20/MT. JPM Europe Steel analyst believes pullback
of Turkish scrap buyers could hit long product prices. HRC price increase
continues with CIS import prices increasing to $725/MT (implying landed
domestic steel prices of Rs37.5K/MT v/s estimated domestic prices of
Rs34.5K/MT). While headline HRC price increase is positive for Indian mills
(imports are not yet taking place as there is a gap between imported and
domestic prices with the latter being lower), sluggish domestic demand in our
view is not allowing for large price increases. We believe the recent sharp
increase in steel prices, could potentially impact apparent demand (as restocking
ebbs down).
• Spot iron ore hits $190/MT, potential re-start of exports out from
Karnataka, but also potential increase in export tax: Spot iron ore price
surge continues hitting $190/MT. Unless the state Government in Karnataka,
renews its July order next week, we see strong possibility of re-start in exports.
However, there have been media reports (FE) that there could be a uniform
export tax of 20% on iron ore. Export taxes on fines is currently 5%, and over
the past few years export taxes have been increased with an increase in spot
iron ore prices and we would not be surprised to see export tax increase to
10% from current 5%.
• Coking coal update: BHP’s Dec quarter met coal production was down 24%
q/q. JPM analyst Amos Fletcher highlights that ‘increased water pumping
capacity following the last floods in 2008 so there has been minimal water
accumulation in-pit, however, overburden removal has been restricted; thus,
the company expects an ongoing impact on production, sales and costs
through H2. Sales of 7.3Mt from Queensland were down 15% QoQ as
production was augmented by drawdown of stockpiles but in line with our
estimates’. Rio’s coking coal production fell 6% but sales increased 22%
through inventory run down. Spot thermal coal prices remain very strong and
are between $130-140/MT.
• Energy capex coming back? Indian pipe mill wins export order: JPM Oil
Services analyst David Anderson expects global upstream spending to increase
15% in 2011. Transportation capex (pipelines) has a significant lag. However
we would point out that Indian pipe mill Jindal SAW (JSAW, NR) this week
announced an order win of HSAW pipes of $150mn. Indian pipe exports have
declined and a revival in demand for pipes would be positive for steel demand
(LSAW uses plates, while HSAW uses HR Coils)
• Spot alumina prices continue to remain strong and have risen to $380/MT.
Metal News Tracker
Steel
China’s 2010 Steel Production Rises 9.3% as Demand Grows
China, the world’s biggest steel producer, boosted crude steel output by 9.3 percent
to 627 million metric tons in 2010, driven by demand from automakers and railway
builders. In December, China’s output of crude steel rose 6.3 percent to 51.5 million
tons, the National Bureau of Statistics said. (Bloomberg)
Steel mills cut production on high input cost
Squeezed between high raw material and range-bound steel prices, secondary and
mini-producers of steel have reduced their operating capacity by half in the past
month. Although steel mills have revised product prices more than once recently,
they’ve failed to pass the proportionate increase in raw material prices fully to
consumers. The supply of steel long products such as ingots, billets, TMT Bars and
re-bars, used in infrastructure and construction sectors, has also become tight. Long
steel is a fragmented market and the producers are induction furnace-oriented. With
the current level of raw material prices, they lack working capital. A JSW Steel
official said, “Availability of long steel is restricted, as 55-60 per cent of the
production comes from secondary producers and scrap prices are very high right
now.” The official said it was not viable for the secondary makers to manufacture
steel at the current raw material prices. “That is why they are affected.” Anil Suraj, a
ferrous metal analyst in Mandi Gobindgarh, said, “Secondary steel producers are
suffering in this region due to acute power shortage. Steel makers of the north
majorly use scrap, sponge iron and power to make long steel and as power is a big
issue, most of the units are either shut or are running dangerously low on capacities.”
Raw Material
Iron ore prices soar to record high
Iron ore prices have hit an all-time high as supply disruptions in India, the world’s
third-largest exporter of the steelmaking commodity, tighten the market just as Asian
steelmakers rush to buy ahead of the Chinese New Year. The price of spot Australian
benchmark iron ore, which includes freight costs, hit a peak of $185 a tonne on
Wednesday, according to price provider Platts. The current spike comes on the back
of tight supplies from India following Karnataka state’s decision to ban iron ore
exports, which accounts for about a quarter of India’s annual exports of more than
100m tonnes. Orissa, which accounts for a fifth of India’s ore exports, also said
recently it was considering a similar ban. The ban in India has tightened supplies as
Asian steelmakers step up their buying. Iron ore traders are also concerned about
supplies from Iran as Tehran considers introducing an export duty to reduce overseas
sales and keep its domestic steelmakers well supplied. (Financial Times)
Iron ore likely to attract 20% uniform export duty
The government is likely to impose uniform 20% export duty on all classes of iron
ore (fines and lumps). In the forthcoming Union Budget, the finance minister Pranab
Mukherjee is expected to announce this decision, as there is a growing consensus
within the government that in view of the big spurt in the global prices of this
commodity, the exporters won’t really find a higher impost unbearable. A 20%
across the board levy on iron ore is expected to provide revenue between Rs 10,000-
12,000 crore to the government at current global ore prices that are prevailing at high
levels of $160-180 per tonne, a finance ministry official said. At present, the export
duty on iron ore fines is 5% and that on lumps is 15%. The fines, whose domestic
consumption is limited, is the main component of exports comprising over 80% of
total iron ore going out from the country. (Financial Express)
Coking coal prices to rise as supplies likely to remain tight
Coking coal supplies are likely to remain tight for another three months and prices
may rise by a third from about USD 300 a tonne now after floods in Australia's
Queensland state hit output of the key steelmaking raw material. Mr Arun Kumar
Jagataramka chairman of India's Gujarat NRE Coke Ltd estimated the coking coal
production loss at 15 million to 20 million tonnes until now due to the floods. Mr
Jagatramka said that "I won't be surprised if hard coking coal prices touch $400 a
tonne adding that prices have already reached $300 a tonne. They were about $200 a
tonne before the floods. (Dow Jones Newswires)
Base Metal
Global Copper Shortage to Widen on Economic Recovery
Copper demand will outstrip supply for the next two years as the economy recovers,
China sustains consumption and mine output drops, Japan’s top producer said.
Demand will likely exceed supply by 635,000 metric tons in 2011, the biggest deficit
since 2004, compared with 234,000 tons last year, Hidenori Kamoo, general manager
of the marketing department at Pan Pacific Copper Co., said. The shortage may be
91,000 tons in 2012, he said. “The market will see a wider deficit because of steady
demand growth in emerging markets, including China and Brazil, a gradual
economic recovery in the U.S. and Europe and tight mine supplies,” Kamoo said.
(Bloomberg)
Other News
Coal block auction from April: Min
Coal minister Sriprakash Jaiswal said that he was hopeful of introducing competitive
bidding for captive coal mines from April and that within a month, rules and
regulations for competitive bidding will be finalized. Jaiswal also said the ministry
will introduce the bill to set up a sectoral regulator in Parliament's Budget session
and introduce Coal Regulatory Bill. The proposed Coal Regulatory Authority Bill
aims at regulating and conserving coal resources, besides protecting the interests of
consumers and producers. The bill will facilitate standard operational norms and
establish benchmarks in safety standards, performance and productivity through
adoption of best mining practices. Independent regulation of the sector is considered
important for fixing formulae for price revision for long-term fuel supply
agreements, ensuring competitiveness of e-auction of coal, fixing trading margins
and increasing transparency in allocation of the available reserves. (The Times of
India and Business Standard)
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
While scrap prices surge seems to be peaking out (for
the time at least), HRC price surge continues
• Scrap prices peaking out? Long steel prices could hit near term ‘air
pocket', HRC price surge continues: Scrap prices after a sharp rally since
Nov, seems to be peaking out with recent transactions taking below MB index
price of $503/MT and as a result export prices of billets and re-bars from
Turkey have fallen by $20/MT. JPM Europe Steel analyst believes pullback
of Turkish scrap buyers could hit long product prices. HRC price increase
continues with CIS import prices increasing to $725/MT (implying landed
domestic steel prices of Rs37.5K/MT v/s estimated domestic prices of
Rs34.5K/MT). While headline HRC price increase is positive for Indian mills
(imports are not yet taking place as there is a gap between imported and
domestic prices with the latter being lower), sluggish domestic demand in our
view is not allowing for large price increases. We believe the recent sharp
increase in steel prices, could potentially impact apparent demand (as restocking
ebbs down).
• Spot iron ore hits $190/MT, potential re-start of exports out from
Karnataka, but also potential increase in export tax: Spot iron ore price
surge continues hitting $190/MT. Unless the state Government in Karnataka,
renews its July order next week, we see strong possibility of re-start in exports.
However, there have been media reports (FE) that there could be a uniform
export tax of 20% on iron ore. Export taxes on fines is currently 5%, and over
the past few years export taxes have been increased with an increase in spot
iron ore prices and we would not be surprised to see export tax increase to
10% from current 5%.
• Coking coal update: BHP’s Dec quarter met coal production was down 24%
q/q. JPM analyst Amos Fletcher highlights that ‘increased water pumping
capacity following the last floods in 2008 so there has been minimal water
accumulation in-pit, however, overburden removal has been restricted; thus,
the company expects an ongoing impact on production, sales and costs
through H2. Sales of 7.3Mt from Queensland were down 15% QoQ as
production was augmented by drawdown of stockpiles but in line with our
estimates’. Rio’s coking coal production fell 6% but sales increased 22%
through inventory run down. Spot thermal coal prices remain very strong and
are between $130-140/MT.
• Energy capex coming back? Indian pipe mill wins export order: JPM Oil
Services analyst David Anderson expects global upstream spending to increase
15% in 2011. Transportation capex (pipelines) has a significant lag. However
we would point out that Indian pipe mill Jindal SAW (JSAW, NR) this week
announced an order win of HSAW pipes of $150mn. Indian pipe exports have
declined and a revival in demand for pipes would be positive for steel demand
(LSAW uses plates, while HSAW uses HR Coils)
• Spot alumina prices continue to remain strong and have risen to $380/MT.
Metal News Tracker
Steel
China’s 2010 Steel Production Rises 9.3% as Demand Grows
China, the world’s biggest steel producer, boosted crude steel output by 9.3 percent
to 627 million metric tons in 2010, driven by demand from automakers and railway
builders. In December, China’s output of crude steel rose 6.3 percent to 51.5 million
tons, the National Bureau of Statistics said. (Bloomberg)
Steel mills cut production on high input cost
Squeezed between high raw material and range-bound steel prices, secondary and
mini-producers of steel have reduced their operating capacity by half in the past
month. Although steel mills have revised product prices more than once recently,
they’ve failed to pass the proportionate increase in raw material prices fully to
consumers. The supply of steel long products such as ingots, billets, TMT Bars and
re-bars, used in infrastructure and construction sectors, has also become tight. Long
steel is a fragmented market and the producers are induction furnace-oriented. With
the current level of raw material prices, they lack working capital. A JSW Steel
official said, “Availability of long steel is restricted, as 55-60 per cent of the
production comes from secondary producers and scrap prices are very high right
now.” The official said it was not viable for the secondary makers to manufacture
steel at the current raw material prices. “That is why they are affected.” Anil Suraj, a
ferrous metal analyst in Mandi Gobindgarh, said, “Secondary steel producers are
suffering in this region due to acute power shortage. Steel makers of the north
majorly use scrap, sponge iron and power to make long steel and as power is a big
issue, most of the units are either shut or are running dangerously low on capacities.”
Raw Material
Iron ore prices soar to record high
Iron ore prices have hit an all-time high as supply disruptions in India, the world’s
third-largest exporter of the steelmaking commodity, tighten the market just as Asian
steelmakers rush to buy ahead of the Chinese New Year. The price of spot Australian
benchmark iron ore, which includes freight costs, hit a peak of $185 a tonne on
Wednesday, according to price provider Platts. The current spike comes on the back
of tight supplies from India following Karnataka state’s decision to ban iron ore
exports, which accounts for about a quarter of India’s annual exports of more than
100m tonnes. Orissa, which accounts for a fifth of India’s ore exports, also said
recently it was considering a similar ban. The ban in India has tightened supplies as
Asian steelmakers step up their buying. Iron ore traders are also concerned about
supplies from Iran as Tehran considers introducing an export duty to reduce overseas
sales and keep its domestic steelmakers well supplied. (Financial Times)
Iron ore likely to attract 20% uniform export duty
The government is likely to impose uniform 20% export duty on all classes of iron
ore (fines and lumps). In the forthcoming Union Budget, the finance minister Pranab
Mukherjee is expected to announce this decision, as there is a growing consensus
within the government that in view of the big spurt in the global prices of this
commodity, the exporters won’t really find a higher impost unbearable. A 20%
across the board levy on iron ore is expected to provide revenue between Rs 10,000-
12,000 crore to the government at current global ore prices that are prevailing at high
levels of $160-180 per tonne, a finance ministry official said. At present, the export
duty on iron ore fines is 5% and that on lumps is 15%. The fines, whose domestic
consumption is limited, is the main component of exports comprising over 80% of
total iron ore going out from the country. (Financial Express)
Coking coal prices to rise as supplies likely to remain tight
Coking coal supplies are likely to remain tight for another three months and prices
may rise by a third from about USD 300 a tonne now after floods in Australia's
Queensland state hit output of the key steelmaking raw material. Mr Arun Kumar
Jagataramka chairman of India's Gujarat NRE Coke Ltd estimated the coking coal
production loss at 15 million to 20 million tonnes until now due to the floods. Mr
Jagatramka said that "I won't be surprised if hard coking coal prices touch $400 a
tonne adding that prices have already reached $300 a tonne. They were about $200 a
tonne before the floods. (Dow Jones Newswires)
Base Metal
Global Copper Shortage to Widen on Economic Recovery
Copper demand will outstrip supply for the next two years as the economy recovers,
China sustains consumption and mine output drops, Japan’s top producer said.
Demand will likely exceed supply by 635,000 metric tons in 2011, the biggest deficit
since 2004, compared with 234,000 tons last year, Hidenori Kamoo, general manager
of the marketing department at Pan Pacific Copper Co., said. The shortage may be
91,000 tons in 2012, he said. “The market will see a wider deficit because of steady
demand growth in emerging markets, including China and Brazil, a gradual
economic recovery in the U.S. and Europe and tight mine supplies,” Kamoo said.
(Bloomberg)
Other News
Coal block auction from April: Min
Coal minister Sriprakash Jaiswal said that he was hopeful of introducing competitive
bidding for captive coal mines from April and that within a month, rules and
regulations for competitive bidding will be finalized. Jaiswal also said the ministry
will introduce the bill to set up a sectoral regulator in Parliament's Budget session
and introduce Coal Regulatory Bill. The proposed Coal Regulatory Authority Bill
aims at regulating and conserving coal resources, besides protecting the interests of
consumers and producers. The bill will facilitate standard operational norms and
establish benchmarks in safety standards, performance and productivity through
adoption of best mining practices. Independent regulation of the sector is considered
important for fixing formulae for price revision for long-term fuel supply
agreements, ensuring competitiveness of e-auction of coal, fixing trading margins
and increasing transparency in allocation of the available reserves. (The Times of
India and Business Standard)
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