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The various pulls and pushes on iron ore: Spot iron ore remains in a free fall
with high grade spot iron ore now below $160/MT (last prices at $155/MT)
from a recent peak of +$190/MT, with buyers still not present in the market and
hence transaction volume remaining thin. Traded prices are now at a wide range
across the various grades. Media reports (FT) highlighed that Vale is open to
discussions of 'different terms'. Currently contract prices are quarterly in nature
and the current Dec quarter contract price is siginificantly lower than spot, thus
resulting in mills not keen to pick up volumes. Recently the iron ore swaps
market had record volumes. With the Chinese mills essentially the key buyer
for spot iron ore, till they come back to the market, any recovery in the spot
market remains difficult and till they remain out, spot prices could correct
further. On the supply side, the much awaited Justice Shah report regarding ore
mining in Goa (Western india) is due soon, and media reports (BS) have quoted
members of the Shah Committee as suggesting that ban of exports is one
potential option being considered. If iron ore exports from Goa were to be
stopped, essentially most of the Indian exports would have halted.
Why the outlook should not be very beraish for iron ore: JPM Global Metal
analyst Michael Jansen highlights 5 reasons as to why the outlook remains
broadly supportive and outlook on Q1 pricing is not too bearish with the key
reasons being a) Chinese cash costs for mining and benefication net out to
$120/MT on a CIF basis and with spot iron ore prices falling, Chinese
production of +40% y/y seen in Sept could tail off; b)FAI still expanding at
25% YTD levels; c) Credit relief for downstream users; d) current de-stocking
may not last beyond end 2011 (implying next 2 months).
INR saving the day so far: With spot iron ore and coking coal prices falling,
spot HRC steel prices are falling in sync ith export prices out of CIS and China
below $650/MT (offers are near $630-640/MT). However, the INR depreciation
of ~11% has negated most of the steel price decline (before the crisis HRC
import price into India were near $700-720/MT), so prices are down in $ terms
by 11% in line with INR and hence landed prices have not changed materially so
far for the Indian mills.
Metals- Bifurcation between sentiment and reality?: JPM Global metals
analyst Michael Jansen highlights that 'The broad theme in the metals markets
over the past 1-2 months has been the significant bifurcation between
sentiment and reality. The financial players in this space in particular have
been downbeat on the metals basis expected recession in Europe, the rising
prospect of recession in the US and the prospect of a credit-induced hard
landing in China. The physical markets though generally continued to signal
that matters are actually reasonably healthy (potentially with the exception of
aluminium where the demand environment has slowed, largely due to hitherto
very strong demand numbers) and it would seem that, in spite of extreme
volatility in the flat price, that the physical market is reading it more correctly.
The macro bears though are not prepared to give up easily; which means that
the flat price across the board may yet probe lower, and copper towards $6k-
$6.5k. But from a micro perspective the environment is more robust, especially
in copper.’
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The various pulls and pushes on iron ore: Spot iron ore remains in a free fall
with high grade spot iron ore now below $160/MT (last prices at $155/MT)
from a recent peak of +$190/MT, with buyers still not present in the market and
hence transaction volume remaining thin. Traded prices are now at a wide range
across the various grades. Media reports (FT) highlighed that Vale is open to
discussions of 'different terms'. Currently contract prices are quarterly in nature
and the current Dec quarter contract price is siginificantly lower than spot, thus
resulting in mills not keen to pick up volumes. Recently the iron ore swaps
market had record volumes. With the Chinese mills essentially the key buyer
for spot iron ore, till they come back to the market, any recovery in the spot
market remains difficult and till they remain out, spot prices could correct
further. On the supply side, the much awaited Justice Shah report regarding ore
mining in Goa (Western india) is due soon, and media reports (BS) have quoted
members of the Shah Committee as suggesting that ban of exports is one
potential option being considered. If iron ore exports from Goa were to be
stopped, essentially most of the Indian exports would have halted.
Why the outlook should not be very beraish for iron ore: JPM Global Metal
analyst Michael Jansen highlights 5 reasons as to why the outlook remains
broadly supportive and outlook on Q1 pricing is not too bearish with the key
reasons being a) Chinese cash costs for mining and benefication net out to
$120/MT on a CIF basis and with spot iron ore prices falling, Chinese
production of +40% y/y seen in Sept could tail off; b)FAI still expanding at
25% YTD levels; c) Credit relief for downstream users; d) current de-stocking
may not last beyond end 2011 (implying next 2 months).
INR saving the day so far: With spot iron ore and coking coal prices falling,
spot HRC steel prices are falling in sync ith export prices out of CIS and China
below $650/MT (offers are near $630-640/MT). However, the INR depreciation
of ~11% has negated most of the steel price decline (before the crisis HRC
import price into India were near $700-720/MT), so prices are down in $ terms
by 11% in line with INR and hence landed prices have not changed materially so
far for the Indian mills.
Metals- Bifurcation between sentiment and reality?: JPM Global metals
analyst Michael Jansen highlights that 'The broad theme in the metals markets
over the past 1-2 months has been the significant bifurcation between
sentiment and reality. The financial players in this space in particular have
been downbeat on the metals basis expected recession in Europe, the rising
prospect of recession in the US and the prospect of a credit-induced hard
landing in China. The physical markets though generally continued to signal
that matters are actually reasonably healthy (potentially with the exception of
aluminium where the demand environment has slowed, largely due to hitherto
very strong demand numbers) and it would seem that, in spite of extreme
volatility in the flat price, that the physical market is reading it more correctly.
The macro bears though are not prepared to give up easily; which means that
the flat price across the board may yet probe lower, and copper towards $6k-
$6.5k. But from a micro perspective the environment is more robust, especially
in copper.’
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