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Monthly Report - January 2012
Metals:: Early signs of revival seen…
Global steel production pruning continued with
capacity utilization at 71.7% in December’11 and steel
prices started going up as restocking activity picked up
along with supply easing. Raw material prices remained
subdued and demand showed improvement in some
parts of the globe. We see clear signs of revival for steel
producers (who had been grappling with high costs, low
prices and demand) and expect earnings improvement
going ahead.
Monthly steel production stood at ~117 MT in December
2011, up ~0.8% YoY with a daily run rate of 3.8 MT/day and
a capacity utilization of 71.7%, down by ~200 bps MoM on
account of cuts from marginal and high cost producers.
CY11 global steel production growth stood at ~6.8%.
HR coil prices saw a pullback after supply eased
considerably in December and HR coil price went to
US$625/tonne in CIS markets during Jan-12. Steel prices
hovered in the range of US$650-670/tonne in China and
European markets.
Spot iron ore prices remained at ~US$140/tonne for 62%
Fe grade; hard coking coal spot prices continue to remain
soft and Q4FY12 contract prices settled at US$230/tonne.
Rupee depreciation w.r.t US dollar has started to reverse
and is expected to help steelmakers recover some of their
MTM losses on foreign currency loans and payables.
Steel producers’ profitability is expected to improve going
forward with pickup in demand, pullback in product prices
and reduction in raw material costs (especially coking
coal).
Among base metals, LME average prices remained flat to
positive MoM as current LME prices remained below the
marginal COP. Inventories remained high overall despite
some supply cuts coming from producers.
We remain positive on mining stocks based on attractive
valuations and HZL remains our top pick in the mining
space. Macro concerns have reduced in the steel space
with drop in production, support for steel prices and
reduction in raw material costs. We turn positive on JSW
steel and have upgraded it to buy. We maintain our sell
calls on Tata Steel and SAIL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Monthly Report - January 2012
Metals:: Early signs of revival seen…
Global steel production pruning continued with
capacity utilization at 71.7% in December’11 and steel
prices started going up as restocking activity picked up
along with supply easing. Raw material prices remained
subdued and demand showed improvement in some
parts of the globe. We see clear signs of revival for steel
producers (who had been grappling with high costs, low
prices and demand) and expect earnings improvement
going ahead.
Monthly steel production stood at ~117 MT in December
2011, up ~0.8% YoY with a daily run rate of 3.8 MT/day and
a capacity utilization of 71.7%, down by ~200 bps MoM on
account of cuts from marginal and high cost producers.
CY11 global steel production growth stood at ~6.8%.
HR coil prices saw a pullback after supply eased
considerably in December and HR coil price went to
US$625/tonne in CIS markets during Jan-12. Steel prices
hovered in the range of US$650-670/tonne in China and
European markets.
Spot iron ore prices remained at ~US$140/tonne for 62%
Fe grade; hard coking coal spot prices continue to remain
soft and Q4FY12 contract prices settled at US$230/tonne.
Rupee depreciation w.r.t US dollar has started to reverse
and is expected to help steelmakers recover some of their
MTM losses on foreign currency loans and payables.
Steel producers’ profitability is expected to improve going
forward with pickup in demand, pullback in product prices
and reduction in raw material costs (especially coking
coal).
Among base metals, LME average prices remained flat to
positive MoM as current LME prices remained below the
marginal COP. Inventories remained high overall despite
some supply cuts coming from producers.
We remain positive on mining stocks based on attractive
valuations and HZL remains our top pick in the mining
space. Macro concerns have reduced in the steel space
with drop in production, support for steel prices and
reduction in raw material costs. We turn positive on JSW
steel and have upgraded it to buy. We maintain our sell
calls on Tata Steel and SAIL.
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