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• Industrial metals grind lower as commodity volatility spikes up: JPM
Global Metals Research analyst Michael Jansen expects investors to further
de-risk which ‘implies the market bias in industrial commodities in coming
weeks will be to trade on the short side’. Michael expects copper to trade
below $8,000 aluminum to move back towards $2500-$2550 and nickel to
trade down to $22,000. Lead and zinc should trade $2200 and $2050
respectively and has downside biases on those targets. Beyond Q2,
Michael highlights that ‘fundamentally driven more bullish outlook on a
6mo+ basis is incredibly reliant on China’s stance on monetary policy.
When the policy handbrake is lifted is thus incredibly important for the
physical metals market as it will determine how much inventory China’s
consumers and merchants can hold and the cost of holding that inventory
(which is sharply escalating currently).
• Steel update- Spot steel bottoming out?: CIS HRC spot steel prices have
held up near $650/MT levels. From here, steel companies should start seeing
the higher cost coking coal flow through (MT in its conference call indicated
40% impact in Q2 and 35% in Q3). Spot scrap steel prices have moved up
recently, though iron ore has remained $185-190/MT levels.
• Interesting updates from India on steel: Usha Martin (NR) in its analyst
conference call indicated that their coking coal purchases from BHP are
now on monthly basis (April at $331/MT and May at $324/MT). We find
this interesting though the larger Indian mills have not yet indicated any
agreement being reached on move from quarterly to monthly contracts.
Another interesting update was NMDC (NR) move to cut domestic iron ore
fines prices (effective April) by 15%. While NMDC has followed an export
FOB parity pricing model (adjusted for levies), the recent sharp increase in
railway freight for iron ore exports and the 20% export taxes, have
sharply reduced the parity price. Lack of meaningful export from Karnataka
has also created a domestic supply glut in iron ore fines. The price cut does
provide some relief to the non integrated domestic steel companies
(though NMDC increased lumps prices). The recent gas issues in Western
India could likely impact near term HRC production, providing steel
companies with a breather in the current over supplied markets. Lastly
Siemens has announced an order win to supply a 1.2MT corex gas based
DRI plant to JSW Steel, scheduled by mid 2013. While JSW is in a quiet
period, we believe a corresponding EAF mill is also likely.
• April numbers from China- Slowdown in imports across commodities
continues: Highlighting the recent de-stocking underway, imports across
metals like iron ore (-4% y/y and -11% m/m), copper (-14% m/m and -40%
y/y), and aluminum declined on a m/m and y/y basis. Steel net exports in April
however spiked up m/m to 3.4MT. Even as Aluminum production continues to
move up in China (+2% m/m), aluminum scrap imports also picked up sharply
m/m (+21% m/m).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• Industrial metals grind lower as commodity volatility spikes up: JPM
Global Metals Research analyst Michael Jansen expects investors to further
de-risk which ‘implies the market bias in industrial commodities in coming
weeks will be to trade on the short side’. Michael expects copper to trade
below $8,000 aluminum to move back towards $2500-$2550 and nickel to
trade down to $22,000. Lead and zinc should trade $2200 and $2050
respectively and has downside biases on those targets. Beyond Q2,
Michael highlights that ‘fundamentally driven more bullish outlook on a
6mo+ basis is incredibly reliant on China’s stance on monetary policy.
When the policy handbrake is lifted is thus incredibly important for the
physical metals market as it will determine how much inventory China’s
consumers and merchants can hold and the cost of holding that inventory
(which is sharply escalating currently).
• Steel update- Spot steel bottoming out?: CIS HRC spot steel prices have
held up near $650/MT levels. From here, steel companies should start seeing
the higher cost coking coal flow through (MT in its conference call indicated
40% impact in Q2 and 35% in Q3). Spot scrap steel prices have moved up
recently, though iron ore has remained $185-190/MT levels.
• Interesting updates from India on steel: Usha Martin (NR) in its analyst
conference call indicated that their coking coal purchases from BHP are
now on monthly basis (April at $331/MT and May at $324/MT). We find
this interesting though the larger Indian mills have not yet indicated any
agreement being reached on move from quarterly to monthly contracts.
Another interesting update was NMDC (NR) move to cut domestic iron ore
fines prices (effective April) by 15%. While NMDC has followed an export
FOB parity pricing model (adjusted for levies), the recent sharp increase in
railway freight for iron ore exports and the 20% export taxes, have
sharply reduced the parity price. Lack of meaningful export from Karnataka
has also created a domestic supply glut in iron ore fines. The price cut does
provide some relief to the non integrated domestic steel companies
(though NMDC increased lumps prices). The recent gas issues in Western
India could likely impact near term HRC production, providing steel
companies with a breather in the current over supplied markets. Lastly
Siemens has announced an order win to supply a 1.2MT corex gas based
DRI plant to JSW Steel, scheduled by mid 2013. While JSW is in a quiet
period, we believe a corresponding EAF mill is also likely.
• April numbers from China- Slowdown in imports across commodities
continues: Highlighting the recent de-stocking underway, imports across
metals like iron ore (-4% y/y and -11% m/m), copper (-14% m/m and -40%
y/y), and aluminum declined on a m/m and y/y basis. Steel net exports in April
however spiked up m/m to 3.4MT. Even as Aluminum production continues to
move up in China (+2% m/m), aluminum scrap imports also picked up sharply
m/m (+21% m/m).
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