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India Equity Research Reports, IPO and Stock News
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• Headwinds ahead for metals? Seems so: JPM global metals analyst Michael
Jansen highlights that ‘solid headwinds are in place for base metals in
particular for the coming 2-3 months and this warrants a very cautious
outlook’. JPM Economists have revised down their global growth
assumptions for 3 weeks in a row and. Secondly Michael highlights that the
tighter credit conditions in China are here to stay and this has negative
implications for base metals in the short term. Net imports of copper by China
in Feb-11 were at the lowest level since Oct-08 and de-stocking of copper by
China could continue for the next couple of months (for further details please
refer to - Base and Precious Metals Daily dated March 21st). While Indian
metal and mining equities do not have copper exposure, any sell-off in the
LME tends to have a negative impact in the short term for Indian names.
• Steel price down move continues even as iron ore prices see some
rebound: Spot steel prices weakened in most markets though Chinese export
HRC prices saw a rebound from $690 to $720/MT. We do not find this
surprising given the temporary tightness post Japan's earth quake. However,
CIS export prices for April have been settled lower at $720-750/MT compared
to earlier offers of $820-835/MT. Also Chinese CRC export offers have come
off sharply (as the earthquake has impacted auto production), and pressure on
Indian domestic CRC prices is also increasing because of this. We expect
Indian steel companies to further increase their discounts/cut list prices across
HRC/CRC over the coming weeks. Spot iron prices have seen a small rebound
over the last week, but given the weakness in Chinese steel prices and level of
port iron ore inventories remain elevated at 83MT, a sharp rally for spot iron
ore looks difficult from here. Global steel production increased 1.6% y/y with
ex-China production up 7.6% y/y. JPM European Steel analyst Alessandro
Abate expects temporary correction in European steel prices with the
spread between Chinese and European steel prices spread at c$180/MT,
significantly above export incentive ($100-120/t). We believe India also
remains at risk from potentially elevated Chinese HRC exports from here
and domestic prices would need to remain at a discount to avoid last
year's situation when imports increased sharply.
• Iron ore- Long term over supply risks: Post BHP’s announcement of
$12.8bn capex across iron ore and coal expansions, in a detailed report
(‘Fortescue Metals- Is there a danger of oversupplying the iron ore market’
dated 25th March, 2011) JPM Australia resource analyst Mark Busuttil
highlights that BHP, RIO, FMG and Vale combined iron ore production would
increase by 11% p.a. for the next 10 years while global consumption of iron
ore increased by 6% p.a over the last 10 years. Assuming BF prod growth of
5.5% till 2015 and 4% from 2015-2020, would result in 74% of global prod
being supplied by the above 4 majors with operating costs of ~$30/MT. Mark
believes that the growth in production could be negative for iron ore prices,
given the steepness at the high end of the cost curve for iron ore.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• Headwinds ahead for metals? Seems so: JPM global metals analyst Michael
Jansen highlights that ‘solid headwinds are in place for base metals in
particular for the coming 2-3 months and this warrants a very cautious
outlook’. JPM Economists have revised down their global growth
assumptions for 3 weeks in a row and. Secondly Michael highlights that the
tighter credit conditions in China are here to stay and this has negative
implications for base metals in the short term. Net imports of copper by China
in Feb-11 were at the lowest level since Oct-08 and de-stocking of copper by
China could continue for the next couple of months (for further details please
refer to - Base and Precious Metals Daily dated March 21st). While Indian
metal and mining equities do not have copper exposure, any sell-off in the
LME tends to have a negative impact in the short term for Indian names.
• Steel price down move continues even as iron ore prices see some
rebound: Spot steel prices weakened in most markets though Chinese export
HRC prices saw a rebound from $690 to $720/MT. We do not find this
surprising given the temporary tightness post Japan's earth quake. However,
CIS export prices for April have been settled lower at $720-750/MT compared
to earlier offers of $820-835/MT. Also Chinese CRC export offers have come
off sharply (as the earthquake has impacted auto production), and pressure on
Indian domestic CRC prices is also increasing because of this. We expect
Indian steel companies to further increase their discounts/cut list prices across
HRC/CRC over the coming weeks. Spot iron prices have seen a small rebound
over the last week, but given the weakness in Chinese steel prices and level of
port iron ore inventories remain elevated at 83MT, a sharp rally for spot iron
ore looks difficult from here. Global steel production increased 1.6% y/y with
ex-China production up 7.6% y/y. JPM European Steel analyst Alessandro
Abate expects temporary correction in European steel prices with the
spread between Chinese and European steel prices spread at c$180/MT,
significantly above export incentive ($100-120/t). We believe India also
remains at risk from potentially elevated Chinese HRC exports from here
and domestic prices would need to remain at a discount to avoid last
year's situation when imports increased sharply.
• Iron ore- Long term over supply risks: Post BHP’s announcement of
$12.8bn capex across iron ore and coal expansions, in a detailed report
(‘Fortescue Metals- Is there a danger of oversupplying the iron ore market’
dated 25th March, 2011) JPM Australia resource analyst Mark Busuttil
highlights that BHP, RIO, FMG and Vale combined iron ore production would
increase by 11% p.a. for the next 10 years while global consumption of iron
ore increased by 6% p.a over the last 10 years. Assuming BF prod growth of
5.5% till 2015 and 4% from 2015-2020, would result in 74% of global prod
being supplied by the above 4 majors with operating costs of ~$30/MT. Mark
believes that the growth in production could be negative for iron ore prices,
given the steepness at the high end of the cost curve for iron ore.
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