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The Lodestone
Aluminum production recovery continues
Chinese trade data for January highlights ramp up of aluminum
production: JPM Global Metals analyst Michael Jansen highlights the Jan-11
trade data in China indicating continued ramp up of aluminum production.
Aluminum product exports at 0.16MT increased 22% m/m (were among the
highest ever), while bauxite and alumina imports remained strong (domestic
aluminum production in 2010 was up 19% y/y at ~15MT). The continued
strong bauxite and alumina imports in China indicate continued strong
aluminum production into Q1-Q2, and as per Michael overall China is not a
bullish factor for aluminum. The IAI data for January showed continued
recovery in production in Western Europe and North America (+1.5% and +
7.4% y/y respectively) and total Asia production increase at +23.5% y/y
driven by ramp up of new smelters in the Middle East. JPM analyst Michael
Jansen highlights that evidence suggests Chinese primary inventories have
turned around after a multi month period of decline. Cost pressure in
aluminum should continue to move up given the higher energy costs.
• While CIS export HRC prices cross $800/MT, spot prices continue to
soften: CIS HRC export prices have touched $830/MT and now are at a
premium to Chinese export HRC prices. At current CIS prices of $830/MT
and Chinese export HRC prices of $775/MT, Indian domestic HRC prices are
at a significant discount to both of them (14% and 7% respectively). While
this means that Indian steel companies are likely to announce price increases
next week, given that a) spot steel prices are softening, with Chinese domestic
HRC prices down 2-3% (long prices in some regions have declined on lower
scrap prices) and b) domestic demand supply mis-match; large price increases
in India are unlikely to sustain.
• Spot iron ore sees modest declines, while scrap remains flat: Spot iron ore
prices have declined to $196/MT even as port inventories in China remained
broadly flat. While Monday's Indian Budget would give clarity on whether
export taxes on fines is increased (currently at 5%, we expect export taxes
likely to be increased to 10%), from here a further sustained up-move in spot
iron ore looks difficult. Spot scrap prices remain flat.
• Jan-2011 Steel production highlights: IISI data highlighted global steel
production at 119.4MT (+3% y/y, and +5% m/m on a daily adjusted basis).
JPM European steel analyst Alessandro Abate in his note (January Global steel
production, dated 21st Feb 2011), indicates ‘visibility on ex-China production
growth momentum is gaining strength with North America steel production
not yet showing the impact of a recovery of capacity utilization rate more
skewed towards mid Q1'11’. Alessandro believes that the simultaneous
acceleration of global steel production and cash cost (mostly iron ore and coal)
continues to favor companies with a high gearing of sales to spot steel prices,
backward integration into raw materials and recovery of utilization rates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The Lodestone
Aluminum production recovery continues
Chinese trade data for January highlights ramp up of aluminum
production: JPM Global Metals analyst Michael Jansen highlights the Jan-11
trade data in China indicating continued ramp up of aluminum production.
Aluminum product exports at 0.16MT increased 22% m/m (were among the
highest ever), while bauxite and alumina imports remained strong (domestic
aluminum production in 2010 was up 19% y/y at ~15MT). The continued
strong bauxite and alumina imports in China indicate continued strong
aluminum production into Q1-Q2, and as per Michael overall China is not a
bullish factor for aluminum. The IAI data for January showed continued
recovery in production in Western Europe and North America (+1.5% and +
7.4% y/y respectively) and total Asia production increase at +23.5% y/y
driven by ramp up of new smelters in the Middle East. JPM analyst Michael
Jansen highlights that evidence suggests Chinese primary inventories have
turned around after a multi month period of decline. Cost pressure in
aluminum should continue to move up given the higher energy costs.
• While CIS export HRC prices cross $800/MT, spot prices continue to
soften: CIS HRC export prices have touched $830/MT and now are at a
premium to Chinese export HRC prices. At current CIS prices of $830/MT
and Chinese export HRC prices of $775/MT, Indian domestic HRC prices are
at a significant discount to both of them (14% and 7% respectively). While
this means that Indian steel companies are likely to announce price increases
next week, given that a) spot steel prices are softening, with Chinese domestic
HRC prices down 2-3% (long prices in some regions have declined on lower
scrap prices) and b) domestic demand supply mis-match; large price increases
in India are unlikely to sustain.
• Spot iron ore sees modest declines, while scrap remains flat: Spot iron ore
prices have declined to $196/MT even as port inventories in China remained
broadly flat. While Monday's Indian Budget would give clarity on whether
export taxes on fines is increased (currently at 5%, we expect export taxes
likely to be increased to 10%), from here a further sustained up-move in spot
iron ore looks difficult. Spot scrap prices remain flat.
• Jan-2011 Steel production highlights: IISI data highlighted global steel
production at 119.4MT (+3% y/y, and +5% m/m on a daily adjusted basis).
JPM European steel analyst Alessandro Abate in his note (January Global steel
production, dated 21st Feb 2011), indicates ‘visibility on ex-China production
growth momentum is gaining strength with North America steel production
not yet showing the impact of a recovery of capacity utilization rate more
skewed towards mid Q1'11’. Alessandro believes that the simultaneous
acceleration of global steel production and cash cost (mostly iron ore and coal)
continues to favor companies with a high gearing of sales to spot steel prices,
backward integration into raw materials and recovery of utilization rates.
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