Prices remain sluggish across metals , equities:: JPMorgan

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 Iron  ore  update:  Spot  iron  ore  prices  remain  near  $175/MT  levels,  after
declining  $25/MT  from  peak levels. China’s May-11 iron  ore import  stood  at
53MT, broadly flat m/m. JPM UK Mining analyst, David Butler, in his update
on Rio's iron ore site visit (dated 6th June) highlighted that 'most components of
the  first  50MT  expansion  have  been  approved  and  work  is  in  progress’.  Rio
expects c.100MT to be added to the global iron ore over next 8 years up  from
average  85MT  over  2007-10  and  Rio  expects  to  account  for  c.25%  of  this
growth.  Rio  sees  scope  for  specifics  of  the  quarterly  pricing  mechanism  to
change  (reference  index,  quotation  period,  etc).  Rio  confirmed  that  cost
pressures  are  rising.  David  highlights  that  ‘RIO  iron  ore  would  need  to
increase workforce by 10,000 people over the next 5 years to hit production
targets,  a  considerable  task  that  will  be  made  more  difficult  by  the
emerging competition for labour, particularly in WA’. JPM Australia mining
analyst Mark Busuttil in his update on Fortescue (Fortescue-Updating forecasts
following site visit, dated 9th June, 2011) highlights that Fortescue has  brought
forward its target for  production capacity to hit 155MT to June 2013 from June
2014  previously.  However  Mark  highlights that  at  the  site  visit,  management
indicated that the WA government has asked FMG to halt works associated with
Berth  5  at  Port  Headland  (this  berth  was  expected  to  increase  FMG’s  current
capacity in the port to 155MT from 120MT.
 MT plans  to idle  2 blast  furnaces in Europe: As per the metals press  (SBB,
MB,  Bloomberg),  Arcelor  Mittal  plans  to  temporarily  idle  2  blast  furnaces  in
Europe. Ex China  steel  production hit a 32 month high in March at  70MT and
declined 3.4% m/m in April to 68MT. Steel prices have come off over the last 3
months.
 Steel price update: Steel prices remain subdued across most markets. Domestic
long  steel  prices  in  India  (which  have  held  up  relatively  better  so  far  than
domestic  HRC  prices)  have  not  yet  seen  any  cuts  so  far.  Global  scrap  prices
have remained relatively stronger compared to spot iron ore price weakness. The
tight availability of high grade iron ore from Eastern India, has kept sponge iron
ore  prices  at  elevated  levels,  which  has  been  positive  for  long  steel  prices.
However there has been no material improvement in demand so far.
 Base metals remain stuck in range: LME base metals remain stick in a range
for the key  metals.  Index Alumina  prices  have moved  down to  $400/MT  from
$415/MT  a  fortnight  back  even  as  LME  aluminum  prices  remained  broadly
steady.  While  China's  copper  imports  declined  in  May,  copper  scrap  imports
increased  both on a m/m and y/y basis and at 0.4MT were the highest monthly
import volumes for the year
 Relative performers/under performers: Indian mining and steel equities have
out  performed  their  regional  and  global  peers  in  the  last  1  month.  Not
surprisingly  steel  equities  have  relatively  out  performed  base  metal  equities in
India. Coal India has been the best performing mining stock in India