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• Spot steel prices inching up, as higher cost raw materials start flowing
through…: Over the last week spot HRC steel prices out of both CIS and
China moved up $20/MT. Admittedly these are offer prices and not
transaction prices, and hence it is difficult to say whether the price increases
will hold. However, from here steel mills should start seeing the impact of the
higher cost quarterly contracts of key inputs like coking coal and iron ore.
JSW in its analyst meet highlighted that the $330/MT coking coal would start
flowing through the P&L from end May. Rebar prices in some parts of
Europe (up from €510/MT in end April to €550/MT in mid May) have also
moved up on higher scrap costs. A more sustainable steel price increase
would be dependent on apparent demand and whether steel buyers start restocking from current levels.
• …but stress in domestic steel markets continues in India: Indian steel mills
have not been able to take the mid month steel price increase. On the contrary,
we believe discounts have increased. What is surprising is that even after gas
issues potentially impacting Western India mills, we have not seen any
material improvement in sentiment. What could possibly help the situation is
if the mills extend their maintainence shutdowns, which normally are taken
during this time period.
• No impact so far from power situation on steel production in China, but
spot iron ore finally cooling off indicating potential steel production
decline: The daily steel production number for the first 10 days in early May
stood at 1.974MT implying no slowdown in production/impact from the talked
about seasonal power outages. However, spot iron ore prices have fallen to
$184/MT from peak levels of $190/MT indicating slowdown in Chinese
demand for iron ore as steel production potentially slows from here on the
seasonal power outages.
• Japan steel impact: JPM Japan Steel analyst Akiro Kishimoto in his update
on ordinary steel orders in March in Japan highlights that construction sector
orders are up on reconstruction sector demand (11.7% m/m), offsetting the
decline in auto sector orders (-16% m/m) with total March ordinary steel
sector orders rising 0.3% m/m in March. While Akira expects a low level of
demand in April orders given the auto sector, he does not see a protracted
phase of weaker orders as OEM’s have brought forward production.
• Base metals- volatility continues, aluminum inventories increase 136KT:
Volatility continued across industrial metals with some upward movement.
Aluminum inventories increased by 136KT. However, JPM global metals
analyst Michael Jansen sees this number as ‘disappointing for enthusiasts of
the massive off warrant situation’.
• Coal remains in focus in India:The Indian government is focusing on the
coal situation given the production-demand mismatch.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• Spot steel prices inching up, as higher cost raw materials start flowing
through…: Over the last week spot HRC steel prices out of both CIS and
China moved up $20/MT. Admittedly these are offer prices and not
transaction prices, and hence it is difficult to say whether the price increases
will hold. However, from here steel mills should start seeing the impact of the
higher cost quarterly contracts of key inputs like coking coal and iron ore.
JSW in its analyst meet highlighted that the $330/MT coking coal would start
flowing through the P&L from end May. Rebar prices in some parts of
Europe (up from €510/MT in end April to €550/MT in mid May) have also
moved up on higher scrap costs. A more sustainable steel price increase
would be dependent on apparent demand and whether steel buyers start restocking from current levels.
• …but stress in domestic steel markets continues in India: Indian steel mills
have not been able to take the mid month steel price increase. On the contrary,
we believe discounts have increased. What is surprising is that even after gas
issues potentially impacting Western India mills, we have not seen any
material improvement in sentiment. What could possibly help the situation is
if the mills extend their maintainence shutdowns, which normally are taken
during this time period.
• No impact so far from power situation on steel production in China, but
spot iron ore finally cooling off indicating potential steel production
decline: The daily steel production number for the first 10 days in early May
stood at 1.974MT implying no slowdown in production/impact from the talked
about seasonal power outages. However, spot iron ore prices have fallen to
$184/MT from peak levels of $190/MT indicating slowdown in Chinese
demand for iron ore as steel production potentially slows from here on the
seasonal power outages.
• Japan steel impact: JPM Japan Steel analyst Akiro Kishimoto in his update
on ordinary steel orders in March in Japan highlights that construction sector
orders are up on reconstruction sector demand (11.7% m/m), offsetting the
decline in auto sector orders (-16% m/m) with total March ordinary steel
sector orders rising 0.3% m/m in March. While Akira expects a low level of
demand in April orders given the auto sector, he does not see a protracted
phase of weaker orders as OEM’s have brought forward production.
• Base metals- volatility continues, aluminum inventories increase 136KT:
Volatility continued across industrial metals with some upward movement.
Aluminum inventories increased by 136KT. However, JPM global metals
analyst Michael Jansen sees this number as ‘disappointing for enthusiasts of
the massive off warrant situation’.
• Coal remains in focus in India:The Indian government is focusing on the
coal situation given the production-demand mismatch.
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