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• North America steel- Results takeaways – Across the board strength
from sharp price increases, decent shipments: J.P. Morgan North America
Steel analyst Michael Gambardella has broadly increased his earnings
estimates and price targets across the sector (US Steel, Nucor, AK Steel, Steel
Dynamics). HRC steel price increases have been the sharpest in the US with
current HRC prices at $850/MT, up $330/MT from Nov-10 levels of
$520/MT. Michael highlights that lead times are also stretching until
April. This kind of steel price momentum so far has been unique to the
US market; while there have been price increases across many other
markets, they have been more muted. For example, domestic steel prices
in India continue to lag imported CIS/China export prices for reasons
including: a) overcapacity in flat steel; b) weakening domestic demand.
Thus regional dynamics in terms of a) industry consolidation; b) import lead
times are also key factors influencing the quantum of price increases.
• Spot scrap market cooling off, thermal coal prices see sharp cut: Spot
scraps are not seeing much volumes as of now. Spot steel prices, particularly
in HRC in US/Europe, continue to move up. China and CIS HRC export
prices have crossed $700/MT levels. Thermal coal prices saw a sharp
correction with prices down 5-6% over the last 1 week. Spot iron ore prices
remain flat with the transportation issues in Goa apparently resolved. We are
still waiting for the expected clarity on the Karnataka mining ban.
• Coking coal update: The metals press (SBB, MB, Bloomberg) has reported
that the Gladstone port aims to load 0.5MT of coal this week, and expects to
receive 140 trains this week and expects to build an inventory of 1MT by end
of next week. J.P. Morgan Australia analyst Alistair Reid in his update on
Macarthur Coal (MCC) highlights that MCC ‘will continue to deliver coal
under long term volume contracts at 2QFY11 contract prices throughout
Jan-Feb11 to make up for volumes lost in 2QFY11’. Alistair also highlights
that ‘While MCC continues to work towards returning to normal operations at
Coppabella and Moorvale, coal sales in 2HFY11E remain dependent on
production as the Group has depleted mine site coal stockpiles (Source:
Bloomberg) and does not have meaningful levels of port stockpiles. Given
we are still in the middle of the seasonal wet weather period (Jan- Mar),
we believe that the Group is at risk of further coal sales disruptions in
2HFY11E’.
• Indian coal production – clarity on CEPI critical over the next 2 months:
Media reports (Bloomberg, ET) have reported that Coal India is likely to cut
production estimates for FY11/12E (we had commented on this in our update
– ‘Mgmt highlights potentially large volume miss in FY12E on Environment
issues; Both P and E at risk’ dated 24th Dec, 2010). We believe the broader
issue beyond the earnings impact on COAL India is the impact on the user
industries, particularly in Eastern India, across utilities, cement and CPP users,
especially in the backdrop of surging import prices
Metal News Tracker
Steel
CISA not optimistic on China’s steel export prospects for 2011
CISA outlined reasons for its lack of optimism on the prospects for Chinese steel
exports in 2011. According to the analysis of the CISA, in 2010 China's exports of
finished steel to South Korea, India, and ASEAN countries accounted for 48% of its
total finished steel exports. However, since global steel production is indicating
strong growth (e.g., in South Korea, 15 million mt of new crude steel output capacity
is expected to come on stream in 2011), China's steel exports will be negatively
affected. In addition, impacted by the relatively loose monetary policies introduced
by the US and Japan, the Chinese currency has appreciated further, making it more
difficult for Chinese steel enterprises to export. Furthermore, Chinese national policy
aims to restrict exports resource-based products which involve high levels of energy
consumption and pollution. International trade protectionism is expected to pose an
additional barrier in the way of Chinese steel exports in 2011. Meanwhile, the CISA
pointed out that the US dollar has continued to depreciate, while international prices
of crude oil, iron ore, coking coal, scrap, etc., have increased significantly and so
steel enterprises face enormous cost pressure. (SteelOrbis)
Demand to push steel prices up after break
China's steel prices are expected to rise after the Spring Festival holiday on higher
demand, but exports may slow this year, the CISA said. However, a government plan
to build 10 million affordable homes this year and an "investment boom" in hydro,
rail and urban subway projects will keep demand growth steady, the industry group
said. Though the market is weak ahead of the Lunar New Year holiday, which starts
on February 2, demand is expected to recover and prices will trend higher after that,
the group said. Higher costs of raw materials like iron ore and coking coal are also
pushing up steel prices. But exports could face tough times, the association said,
citing slower global economic growth and the appreciating Chinese currency. Also,
the government plan to reduce export tax rebates for certain polluting and energyintensive
industries, including steel, may also take a toll on exporters. (Shanghai
Daily)
Raw Material
Orissa demands revision of royalty rate to at least 20%
Orissa has demanded that the royalty rate needs to be made ad valorem for all
minerals and raised to at least 20% to ensure that that the state gets a fair share from
its mineral wealth. The demand was made by the state government in its pre-Budget
memorandum submitted to the Government of India. Presently, the royalty rate for
iron ore and chromite has been pegged at 10% of sale price on ad-valorem basis. The
state government has pointed out that in some minerals, there are super normal
profits, especially in bulk minerals like iron ore. While the cost of production has
remained the same or even decreased, the market price has increased nearly 10 times
in the last decade. (Business Standard)
Coking coal spot prices jumped 14% last week
Australian coking coal jumped 14% last week as buyers continued to assess the
effect on supplies of flooding in the state of Queensland. Queensland, producer of
about half of global seaborne supply of coking coal for steelmaking, suffered its
worst floods in 50 years this month. Shipments from the port of Hay Point, the
biggest export harbor for the material, dropped 22% last month from November as
floodwaters shut mines and damaged rail lines. (Bloomberg)
Base Metal
Copper market very tight - Freeport-McMoRan
Strong copper demand from China and other emerging countries, together with
steady improvements in North America and Europe, have resulted in a very tight
global copper market. Richard Adkerson, Freeport-McMoRan Copper & Gold’s
CEO said in the longer term, copper prices will be driven by the limits on bringing
new supply into the market. He said that “We would like to turn the spigot on and
produce more copper today, but we can’t do that because of the time it takes to drill
resources, to get permits, to get water and power and so forth.” Mr Adkerson said
while copper demand for residential and commercial real estate in the US remains
weak, other sectors like manufacturing are showing increased strength. He said that
the market is concerned that it’s going to lead to steps to control that growth.”
(Steelguru)
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
• North America steel- Results takeaways – Across the board strength
from sharp price increases, decent shipments: J.P. Morgan North America
Steel analyst Michael Gambardella has broadly increased his earnings
estimates and price targets across the sector (US Steel, Nucor, AK Steel, Steel
Dynamics). HRC steel price increases have been the sharpest in the US with
current HRC prices at $850/MT, up $330/MT from Nov-10 levels of
$520/MT. Michael highlights that lead times are also stretching until
April. This kind of steel price momentum so far has been unique to the
US market; while there have been price increases across many other
markets, they have been more muted. For example, domestic steel prices
in India continue to lag imported CIS/China export prices for reasons
including: a) overcapacity in flat steel; b) weakening domestic demand.
Thus regional dynamics in terms of a) industry consolidation; b) import lead
times are also key factors influencing the quantum of price increases.
• Spot scrap market cooling off, thermal coal prices see sharp cut: Spot
scraps are not seeing much volumes as of now. Spot steel prices, particularly
in HRC in US/Europe, continue to move up. China and CIS HRC export
prices have crossed $700/MT levels. Thermal coal prices saw a sharp
correction with prices down 5-6% over the last 1 week. Spot iron ore prices
remain flat with the transportation issues in Goa apparently resolved. We are
still waiting for the expected clarity on the Karnataka mining ban.
• Coking coal update: The metals press (SBB, MB, Bloomberg) has reported
that the Gladstone port aims to load 0.5MT of coal this week, and expects to
receive 140 trains this week and expects to build an inventory of 1MT by end
of next week. J.P. Morgan Australia analyst Alistair Reid in his update on
Macarthur Coal (MCC) highlights that MCC ‘will continue to deliver coal
under long term volume contracts at 2QFY11 contract prices throughout
Jan-Feb11 to make up for volumes lost in 2QFY11’. Alistair also highlights
that ‘While MCC continues to work towards returning to normal operations at
Coppabella and Moorvale, coal sales in 2HFY11E remain dependent on
production as the Group has depleted mine site coal stockpiles (Source:
Bloomberg) and does not have meaningful levels of port stockpiles. Given
we are still in the middle of the seasonal wet weather period (Jan- Mar),
we believe that the Group is at risk of further coal sales disruptions in
2HFY11E’.
• Indian coal production – clarity on CEPI critical over the next 2 months:
Media reports (Bloomberg, ET) have reported that Coal India is likely to cut
production estimates for FY11/12E (we had commented on this in our update
– ‘Mgmt highlights potentially large volume miss in FY12E on Environment
issues; Both P and E at risk’ dated 24th Dec, 2010). We believe the broader
issue beyond the earnings impact on COAL India is the impact on the user
industries, particularly in Eastern India, across utilities, cement and CPP users,
especially in the backdrop of surging import prices
Metal News Tracker
Steel
CISA not optimistic on China’s steel export prospects for 2011
CISA outlined reasons for its lack of optimism on the prospects for Chinese steel
exports in 2011. According to the analysis of the CISA, in 2010 China's exports of
finished steel to South Korea, India, and ASEAN countries accounted for 48% of its
total finished steel exports. However, since global steel production is indicating
strong growth (e.g., in South Korea, 15 million mt of new crude steel output capacity
is expected to come on stream in 2011), China's steel exports will be negatively
affected. In addition, impacted by the relatively loose monetary policies introduced
by the US and Japan, the Chinese currency has appreciated further, making it more
difficult for Chinese steel enterprises to export. Furthermore, Chinese national policy
aims to restrict exports resource-based products which involve high levels of energy
consumption and pollution. International trade protectionism is expected to pose an
additional barrier in the way of Chinese steel exports in 2011. Meanwhile, the CISA
pointed out that the US dollar has continued to depreciate, while international prices
of crude oil, iron ore, coking coal, scrap, etc., have increased significantly and so
steel enterprises face enormous cost pressure. (SteelOrbis)
Demand to push steel prices up after break
China's steel prices are expected to rise after the Spring Festival holiday on higher
demand, but exports may slow this year, the CISA said. However, a government plan
to build 10 million affordable homes this year and an "investment boom" in hydro,
rail and urban subway projects will keep demand growth steady, the industry group
said. Though the market is weak ahead of the Lunar New Year holiday, which starts
on February 2, demand is expected to recover and prices will trend higher after that,
the group said. Higher costs of raw materials like iron ore and coking coal are also
pushing up steel prices. But exports could face tough times, the association said,
citing slower global economic growth and the appreciating Chinese currency. Also,
the government plan to reduce export tax rebates for certain polluting and energyintensive
industries, including steel, may also take a toll on exporters. (Shanghai
Daily)
Raw Material
Orissa demands revision of royalty rate to at least 20%
Orissa has demanded that the royalty rate needs to be made ad valorem for all
minerals and raised to at least 20% to ensure that that the state gets a fair share from
its mineral wealth. The demand was made by the state government in its pre-Budget
memorandum submitted to the Government of India. Presently, the royalty rate for
iron ore and chromite has been pegged at 10% of sale price on ad-valorem basis. The
state government has pointed out that in some minerals, there are super normal
profits, especially in bulk minerals like iron ore. While the cost of production has
remained the same or even decreased, the market price has increased nearly 10 times
in the last decade. (Business Standard)
Coking coal spot prices jumped 14% last week
Australian coking coal jumped 14% last week as buyers continued to assess the
effect on supplies of flooding in the state of Queensland. Queensland, producer of
about half of global seaborne supply of coking coal for steelmaking, suffered its
worst floods in 50 years this month. Shipments from the port of Hay Point, the
biggest export harbor for the material, dropped 22% last month from November as
floodwaters shut mines and damaged rail lines. (Bloomberg)
Base Metal
Copper market very tight - Freeport-McMoRan
Strong copper demand from China and other emerging countries, together with
steady improvements in North America and Europe, have resulted in a very tight
global copper market. Richard Adkerson, Freeport-McMoRan Copper & Gold’s
CEO said in the longer term, copper prices will be driven by the limits on bringing
new supply into the market. He said that “We would like to turn the spigot on and
produce more copper today, but we can’t do that because of the time it takes to drill
resources, to get permits, to get water and power and so forth.” Mr Adkerson said
while copper demand for residential and commercial real estate in the US remains
weak, other sectors like manufacturing are showing increased strength. He said that
the market is concerned that it’s going to lead to steps to control that growth.”
(Steelguru)
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