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India Equity Research Reports, IPO and Stock News
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MT shutting down furnaces in Europe: As per media reports (MB,
Steelguru), MT is shutting down blast furnaces (BF) in Eisenhüttenstadt,
Germany and Florenge, France (where it had already idled the other BF
earlier). Our European steel analyst Alessandro Abate (Arcelor Mittal - It's
optimization of capacity rather than surrender to weak steel demand dated 9
Sept, 2011) highlighted that the second BF at Florenge is expected to restart
in Sept. Alessdandro highlighted that MT is increasing the utilization
rate at its Poland site. Alessandro believes that ‘from a today point of view,
the risk to volume is more from perception of weakening steel demand into
Q4 rather than from weak demand itself, in our view. We believe this will
lead both steelmakers and end-usres to act defensively on volumes until
September end with inevitable impact on October shipments.’
Steel prices remain steady with an upward bias: So far spot steel prices
are steady. Export prices continue to see marginal movement up, with export
prices to India up another $20/MT to $750/MT CFR. Rupee depreciation
continues (the rupee, at Rs46.55, has depreciated by 6% since end July).
Landed HRC prices as per our calculations have increased to Rs37.3K/MT
compared to estimated domestic HRC prices of Rs35.5K/MT. If the latest
$20/MT import price increase goes through, this could allow Indian mills to
possibly push through another 2-3% steel price increase. The 6% rupee
decline has been positive for Indian steel companies.
Spot iron ore touches $190/MT: Spot iron ore prices are back to April-11
levels. While prices did decline $10/MT from April-11 through June-11,
they have recoverd on Chinese buying. The expected spot iron price decline
has not materliazed this year and fears of lower Chinese steel
production/profitability have not had an impact on the spot market. As our
Transportation analyst Corrine Png highlights, ‘the number of Capesizes
chartered to load cargo in Aug-11 to 111, up 18% y/y, a reversal from the
weak demand in Jan-Jul 2011 when Capesize charters fell 3% y/y’. Port
inventories at Chinese ports increased to 95MT.
Indian iron ore auction to start from Sept-14: As per media reports
(Deccan Herald), the iron ore auction in the state of Karnataka is to start on
Sept-14. As per the media report, the rate for auctioning is yet to be
finalized. The media report has indicated that in a meeting with mine owners
of a formula based on China/Japan export price minus the export duty minus
the transport to ports as a possible base. While there is a quoted number of
25MT as iron ore inventory in Karnataka, we believe high grade ore
inventory (<62%) is significantly lower. Assuming the above formula holds
to fix the base price, at current price of $190/MT for 63.5% Fe content, we
believe the base price works out to Rs3400-3600 for 61.5% Fe content. We
believe investors need to also look at the Fe grade on offer. In our view the
quantity of iron ore on offer and the price discovery would have implications
not only for JSW Steel, but would also determine the cost-push-driven steel
price increase over the next couple of months.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MT shutting down furnaces in Europe: As per media reports (MB,
Steelguru), MT is shutting down blast furnaces (BF) in Eisenhüttenstadt,
Germany and Florenge, France (where it had already idled the other BF
earlier). Our European steel analyst Alessandro Abate (Arcelor Mittal - It's
optimization of capacity rather than surrender to weak steel demand dated 9
Sept, 2011) highlighted that the second BF at Florenge is expected to restart
in Sept. Alessdandro highlighted that MT is increasing the utilization
rate at its Poland site. Alessandro believes that ‘from a today point of view,
the risk to volume is more from perception of weakening steel demand into
Q4 rather than from weak demand itself, in our view. We believe this will
lead both steelmakers and end-usres to act defensively on volumes until
September end with inevitable impact on October shipments.’
Steel prices remain steady with an upward bias: So far spot steel prices
are steady. Export prices continue to see marginal movement up, with export
prices to India up another $20/MT to $750/MT CFR. Rupee depreciation
continues (the rupee, at Rs46.55, has depreciated by 6% since end July).
Landed HRC prices as per our calculations have increased to Rs37.3K/MT
compared to estimated domestic HRC prices of Rs35.5K/MT. If the latest
$20/MT import price increase goes through, this could allow Indian mills to
possibly push through another 2-3% steel price increase. The 6% rupee
decline has been positive for Indian steel companies.
Spot iron ore touches $190/MT: Spot iron ore prices are back to April-11
levels. While prices did decline $10/MT from April-11 through June-11,
they have recoverd on Chinese buying. The expected spot iron price decline
has not materliazed this year and fears of lower Chinese steel
production/profitability have not had an impact on the spot market. As our
Transportation analyst Corrine Png highlights, ‘the number of Capesizes
chartered to load cargo in Aug-11 to 111, up 18% y/y, a reversal from the
weak demand in Jan-Jul 2011 when Capesize charters fell 3% y/y’. Port
inventories at Chinese ports increased to 95MT.
Indian iron ore auction to start from Sept-14: As per media reports
(Deccan Herald), the iron ore auction in the state of Karnataka is to start on
Sept-14. As per the media report, the rate for auctioning is yet to be
finalized. The media report has indicated that in a meeting with mine owners
of a formula based on China/Japan export price minus the export duty minus
the transport to ports as a possible base. While there is a quoted number of
25MT as iron ore inventory in Karnataka, we believe high grade ore
inventory (<62%) is significantly lower. Assuming the above formula holds
to fix the base price, at current price of $190/MT for 63.5% Fe content, we
believe the base price works out to Rs3400-3600 for 61.5% Fe content. We
believe investors need to also look at the Fe grade on offer. In our view the
quantity of iron ore on offer and the price discovery would have implications
not only for JSW Steel, but would also determine the cost-push-driven steel
price increase over the next couple of months.
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