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• Long term impact- Thermal coal stands out: JPM Global coal analyst
John bridges highlights that the long term implications of the Japan
earthquake could likely involve a lower build out of nuclear power and
this would be positive for thermal coal. To highlight the potential
tightness, JPM UK mining analyst David Butler gives the example that
Japan’s current nuclear energy capacity is 40GW and replacing this with
coal would mean an additional 135MT of coal. Structurally this is
negative for India as domestic coal production/evacuation infrastructure
continue to lag domestic demand. Longer term, rebuilding would create
strong demand for various commodities.
• Short term- Steel, iron ore and coking coal: Steel production is likely to
be impacted in the near term. In his latest update, JPM Japan steel analyst
Akiro Kishimoto expects output in March to fall sharply (as much as 0.7-
0.8MT, Jan-11 steel prod stood at 9.65MT). Akiro expects EAFs to
operate below capacity as power availability is likely constrained. In the
near term this could impact coking coal and iron ore (Japan accounts for
13% of global iron ore and 21% of coking coal. For more commodity
details, please refer to JPM UK Mining analyst report – ‘Impact on Metals
and Mining from Japanese Earthquake’. In terms of steel prices, given that
a relatively large part of Japanese steel exports were to Korea, it could
likely push up spot HRC prices as exports become constrained. For Indian
mills though HRC pricing has been weak as Chinese export prices remain
under pressure. We believe Indian steel mills had to give out discounts
recently as pressure from Chinese exports has increased recently.
• Base metals- Copper Tc-Rc/s could move up: JPM UK mining analyst
David Butler highlights that among base metals Japan is not a significant
consumer of most metals except nickel (11% of world demand). However,
Japan accounts for 10% of the world’s copper smelting output and David
expects the earthquake could likely impact copper Tc-Rc.
• Spot steel market remains tough: Post the Chinese Lunar Year, domestic
Chinese prices have weakened and so have export prices, though last week
saw some stabilization in prices. Spot iron ore prices have pulled back
nearly 15% from their recent peak given the weakening of Chinese steel
prices. As a result domestic Indian steel prices remain weak.
• Monthly coking coal contracts arrive? JPM coal analyst John Bridges
highlights that BHP has possibly signed monthly contracts with Indian
companies at $300/MT. We have not been able to confirm this from the
India steel mills yet. While the $300/MT price is lower than the recently
talked about $330/MT price, we view the monthly contracts as negative for
Indian mills as it could likely mean continued higher coking coal costs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• Long term impact- Thermal coal stands out: JPM Global coal analyst
John bridges highlights that the long term implications of the Japan
earthquake could likely involve a lower build out of nuclear power and
this would be positive for thermal coal. To highlight the potential
tightness, JPM UK mining analyst David Butler gives the example that
Japan’s current nuclear energy capacity is 40GW and replacing this with
coal would mean an additional 135MT of coal. Structurally this is
negative for India as domestic coal production/evacuation infrastructure
continue to lag domestic demand. Longer term, rebuilding would create
strong demand for various commodities.
• Short term- Steel, iron ore and coking coal: Steel production is likely to
be impacted in the near term. In his latest update, JPM Japan steel analyst
Akiro Kishimoto expects output in March to fall sharply (as much as 0.7-
0.8MT, Jan-11 steel prod stood at 9.65MT). Akiro expects EAFs to
operate below capacity as power availability is likely constrained. In the
near term this could impact coking coal and iron ore (Japan accounts for
13% of global iron ore and 21% of coking coal. For more commodity
details, please refer to JPM UK Mining analyst report – ‘Impact on Metals
and Mining from Japanese Earthquake’. In terms of steel prices, given that
a relatively large part of Japanese steel exports were to Korea, it could
likely push up spot HRC prices as exports become constrained. For Indian
mills though HRC pricing has been weak as Chinese export prices remain
under pressure. We believe Indian steel mills had to give out discounts
recently as pressure from Chinese exports has increased recently.
• Base metals- Copper Tc-Rc/s could move up: JPM UK mining analyst
David Butler highlights that among base metals Japan is not a significant
consumer of most metals except nickel (11% of world demand). However,
Japan accounts for 10% of the world’s copper smelting output and David
expects the earthquake could likely impact copper Tc-Rc.
• Spot steel market remains tough: Post the Chinese Lunar Year, domestic
Chinese prices have weakened and so have export prices, though last week
saw some stabilization in prices. Spot iron ore prices have pulled back
nearly 15% from their recent peak given the weakening of Chinese steel
prices. As a result domestic Indian steel prices remain weak.
• Monthly coking coal contracts arrive? JPM coal analyst John Bridges
highlights that BHP has possibly signed monthly contracts with Indian
companies at $300/MT. We have not been able to confirm this from the
India steel mills yet. While the $300/MT price is lower than the recently
talked about $330/MT price, we view the monthly contracts as negative for
Indian mills as it could likely mean continued higher coking coal costs.
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