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India Equity Research Reports, IPO and Stock News
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• Chinese export prices, domestic HRC prices drop, CRC also remain
weak: Chinese export prices are down to $700/MT from recent peak of
$780/MT and are now in line with CIS export HRC prices. Domestic Chinese
HRC prices remain weak. Importantly, CRC export prices out of China also
remain weak. Mill prices (Baosteel) have been cut, though they still are at a
premium to spot prices. Given that anecdotal evidence suggests no real pick
up in HRC demand, some further declines in export HRC prices is possible.
Indian steel mills have cut domestic HRC prices by 6-7% from peak levels of
March and given that import prices are softening, we would not be surprised
to see further domestic HRC price cut/discount. Long product prices have
been volatile. We believe lack-luster demand remains a key headwind for
Indian steel (for that matter even cement).
• Spot iron ore continues to move up even as India export volumes slated to
increase from here: Spot iron ore are close to previous peak levels with prices
touching $186/MT. India export volumes should pick up from May as the
Indian Supreme Court has given interim relief and allowed exports to resume
from April 20th even as the court hearing goes on. The metals press (SBB,
MB, Bloomberg) has reported that domestic coking coal prices in China are
seeing some discounts given weak steel demand. Given that domestic Chinese
steel prices are not moving up even as production increases, the two key raw
materials iron ore and coking coal moving in opposite directions.
• Coal- Xstrata presentation highlights strong demand outlook: Xstrata in
its analyst presentation gave a bullish outlook on thermal coal. JPM UK
mining analyst David Butler in his update-‘Xstrata: Feedback from site visit
Day1- Australian thermal coal ops, dated 1st April 2011’ highligts that the
company remained positive on the outlook for both thermal and coking coal
going forward ‘reiterating familiar themes of significant power build in India,
global energy intensity of use for emerging markets (such as China, India,
Indonesia and Brazil) and the fundamental high-cost supply/logistics problems
in China (marginal cost >$100/t ex-mine). Management made an interesting
point that while the logistics problems in China are being addressed by the
govt, new projects are moving further west (into Inner Mongolia and Xinjiang
provinces) and the energy content of these new projects are generally in the
range of 3500-4000kcal vs +4000kcal bituminous coal in Shanxi and
neighbouring provinces. This should support the thermal coal price arbitrage
between domestic and imported Coal. Incremental Indonesian volumes are
likely to be taken up by the surge in demand from lower quality material in
India. As per Bloomberg, the Indian Coal Watch has reported that power
station coal imports increased 33% y/y to 65.7MT. However, actual
import numbers would come with a lag. We estimate coking coal imports
to be 22-25MT.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• Chinese export prices, domestic HRC prices drop, CRC also remain
weak: Chinese export prices are down to $700/MT from recent peak of
$780/MT and are now in line with CIS export HRC prices. Domestic Chinese
HRC prices remain weak. Importantly, CRC export prices out of China also
remain weak. Mill prices (Baosteel) have been cut, though they still are at a
premium to spot prices. Given that anecdotal evidence suggests no real pick
up in HRC demand, some further declines in export HRC prices is possible.
Indian steel mills have cut domestic HRC prices by 6-7% from peak levels of
March and given that import prices are softening, we would not be surprised
to see further domestic HRC price cut/discount. Long product prices have
been volatile. We believe lack-luster demand remains a key headwind for
Indian steel (for that matter even cement).
• Spot iron ore continues to move up even as India export volumes slated to
increase from here: Spot iron ore are close to previous peak levels with prices
touching $186/MT. India export volumes should pick up from May as the
Indian Supreme Court has given interim relief and allowed exports to resume
from April 20th even as the court hearing goes on. The metals press (SBB,
MB, Bloomberg) has reported that domestic coking coal prices in China are
seeing some discounts given weak steel demand. Given that domestic Chinese
steel prices are not moving up even as production increases, the two key raw
materials iron ore and coking coal moving in opposite directions.
• Coal- Xstrata presentation highlights strong demand outlook: Xstrata in
its analyst presentation gave a bullish outlook on thermal coal. JPM UK
mining analyst David Butler in his update-‘Xstrata: Feedback from site visit
Day1- Australian thermal coal ops, dated 1st April 2011’ highligts that the
company remained positive on the outlook for both thermal and coking coal
going forward ‘reiterating familiar themes of significant power build in India,
global energy intensity of use for emerging markets (such as China, India,
Indonesia and Brazil) and the fundamental high-cost supply/logistics problems
in China (marginal cost >$100/t ex-mine). Management made an interesting
point that while the logistics problems in China are being addressed by the
govt, new projects are moving further west (into Inner Mongolia and Xinjiang
provinces) and the energy content of these new projects are generally in the
range of 3500-4000kcal vs +4000kcal bituminous coal in Shanxi and
neighbouring provinces. This should support the thermal coal price arbitrage
between domestic and imported Coal. Incremental Indonesian volumes are
likely to be taken up by the surge in demand from lower quality material in
India. As per Bloomberg, the Indian Coal Watch has reported that power
station coal imports increased 33% y/y to 65.7MT. However, actual
import numbers would come with a lag. We estimate coking coal imports
to be 22-25MT.
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