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Taking a closer look at weak Chinese
auto production
Feature article
Chinese auto production has been one of the worst-performing end-use
sectors in 2011, with the recent May data showing a 4.8% YoY decline. We
think production and sales will pick up into 2H11, as some of the temporary
factors restricting production and demand are eased.
Latest news
Nickel was the best-performing base metal, rising 2.2%, as news of a fatal
accident at the Stobie mine at Vale’s Sudbury operations reached the market,
with the mine being currently closed.
McCloskey's has confirmed that Sumitomo and JFE Steel are thought to have
finally agreed to a $315/t FOB benchmark with Anglo Coal for the July-
September period, in line with that previously agreed to by European
steelmakers and with our forecasts. Meanwhile, the Tex Report has noted that
Anglo has also concluded contracts for its Foxleigh PCI coal with POSCO at
$230/t FOB Australia for the same period, down $45/t (16.4%) sequentially.
The amplified drop for the lower-end met coals is in line with weakening
demand conditions, with Japanese blast furnace output still down from pretsunami
levels. At 73% of the hard coking coal settlement, the PCI deal is at
the lower end of the relative range we expect for hard coking coal in the
coming years and implies a semi-soft coal price of $220/t FOB Australia.
European steel stockholders' shipments fell sharply in April. Volumes were
down by 18% MoM (although this comparison was affected by the number of
working days in the month) and, more worryingly, down 7% YoY. By product,
shipments of carbon steel flat products were down by 10% YoY, while the
decline in shipments of carbon steel long products was a little lower at 8%
YoY. Shipments of stainless steel products fell 16% MoM and 6% YoY, which
contributed to the recent softening in demand for nickel and ferrochrome that
we flagged to clients.
In Indonesia, tin surveyed for export prior to shipment (as required by the
Ministry of Trade) fell by 4% YoY to an eight-month low of 7,013t in May.
However, the total tonnage surveyed this year to-date is up by 11.5% YoY to
39,288t as supply has risen in response to the record high prices of recent
months.
The difficulty in met coal recovery from Queensland has again been
highlighted by May's preliminary shipping stats, which show that exports from
the state fell 3% MoM to 107mtpa. This remains well below the 144mtpa
shipped in November before the floods and the 159mtpa peak in June 2010,
but is up from the 76mtpa shipped in January. The ongoing problems present
risk that our estimated 18mt losses from plan over 2011 may have to be
revised upward, particularly given the potential for strike action and
maintenance outages in the coming weeks. As such, the hard coking coal
market is likely to remain fundamentally tight and inventories low through
2011.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Taking a closer look at weak Chinese
auto production
Feature article
Chinese auto production has been one of the worst-performing end-use
sectors in 2011, with the recent May data showing a 4.8% YoY decline. We
think production and sales will pick up into 2H11, as some of the temporary
factors restricting production and demand are eased.
Latest news
Nickel was the best-performing base metal, rising 2.2%, as news of a fatal
accident at the Stobie mine at Vale’s Sudbury operations reached the market,
with the mine being currently closed.
McCloskey's has confirmed that Sumitomo and JFE Steel are thought to have
finally agreed to a $315/t FOB benchmark with Anglo Coal for the July-
September period, in line with that previously agreed to by European
steelmakers and with our forecasts. Meanwhile, the Tex Report has noted that
Anglo has also concluded contracts for its Foxleigh PCI coal with POSCO at
$230/t FOB Australia for the same period, down $45/t (16.4%) sequentially.
The amplified drop for the lower-end met coals is in line with weakening
demand conditions, with Japanese blast furnace output still down from pretsunami
levels. At 73% of the hard coking coal settlement, the PCI deal is at
the lower end of the relative range we expect for hard coking coal in the
coming years and implies a semi-soft coal price of $220/t FOB Australia.
European steel stockholders' shipments fell sharply in April. Volumes were
down by 18% MoM (although this comparison was affected by the number of
working days in the month) and, more worryingly, down 7% YoY. By product,
shipments of carbon steel flat products were down by 10% YoY, while the
decline in shipments of carbon steel long products was a little lower at 8%
YoY. Shipments of stainless steel products fell 16% MoM and 6% YoY, which
contributed to the recent softening in demand for nickel and ferrochrome that
we flagged to clients.
In Indonesia, tin surveyed for export prior to shipment (as required by the
Ministry of Trade) fell by 4% YoY to an eight-month low of 7,013t in May.
However, the total tonnage surveyed this year to-date is up by 11.5% YoY to
39,288t as supply has risen in response to the record high prices of recent
months.
The difficulty in met coal recovery from Queensland has again been
highlighted by May's preliminary shipping stats, which show that exports from
the state fell 3% MoM to 107mtpa. This remains well below the 144mtpa
shipped in November before the floods and the 159mtpa peak in June 2010,
but is up from the 76mtpa shipped in January. The ongoing problems present
risk that our estimated 18mt losses from plan over 2011 may have to be
revised upward, particularly given the potential for strike action and
maintenance outages in the coming weeks. As such, the hard coking coal
market is likely to remain fundamentally tight and inventories low through
2011.
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