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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• The sell off so far- in commodities: The commodity sell off this time seems
to have impacted commodities other than base metals (arguably they also saw
strong out performance going into the correction) with silver (sparked by
higher margin requirements), oil and cotton (cotton prices started correcting
much earlier than last week) seeing sharp correction. Silver went up 57%,
cotton 49%, followed by oil at 34% and aluminum at 13% (From end Dec to
peak prices before last week) and from peak, silver is down 27%, cotton 29%,
oil 13%, while copper 13% (lead and zinc have been the worst performers in
base metals). Among base metals, aluminum which was a relative out
performer compared to other base metals has also seen a decline. We believe
the upcoming LME warehousing review report should be interesting in terms
of implications, particularly for aluminum which has the largest inventory
among base metals.
• The sell of so far- In equities: For Indian mining equities, the price damage
not surprisingly was limited, with base metal equities seeing modest decline,
while steel equities moving up. Given the oil price decline, Indian markets
have gone up, which have helped limit (so far) the impact with Indian MM
equities down 3-7% for the week. Globally the steel equities are down 4-6%,
while mining equities are down 6-12%.
• Mismatch between steel price and raw material prices continue: Spot Steel
prices remained weak (India HRC import prices from China and CIS in the
$640-680/MT range, implying domestic prices are still at a premium to
imports), while spot iron ore remain near $190/MT. The expected power cuts
in China over the course of the next 2-3 months would be key to watch in
terms of impact on production (across steel and base metals like aluminum).
JOM Global metals analyst Michael Jansen highlights-As the Chinese
economy moves into peak consumption phase and the weather is warmer the
prospect is high for an industrial and retail led spike in energy consumption
that leads to energy rationing. There are already signs of Beijing seeking to
limit power consumption from some heavy users; cement and smelting/refining
for instance.
• Indian steel market remains tough: One of India's leading steel companies
in its analyst conference call commented that they have had to increase
quantity discounts and also increase credit period (both on flat steel) given
weak demand. We believe this is an industry wide problem.
• Coal relatively better placed?: While admittedly seasonal factors are also at
play, coal inventory levels in both China (port inventory) and India (at plant
level) has come off sharply. Thermal coal prices have held up relatively better
(Newcastle thermal coal has held near $120-125/MT levels) over the last few
weeks. Elevated coal prices are negative for Indian aluminum and cement
companies given the import coal element and domestic e-auction coal
purchases.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• The sell off so far- in commodities: The commodity sell off this time seems
to have impacted commodities other than base metals (arguably they also saw
strong out performance going into the correction) with silver (sparked by
higher margin requirements), oil and cotton (cotton prices started correcting
much earlier than last week) seeing sharp correction. Silver went up 57%,
cotton 49%, followed by oil at 34% and aluminum at 13% (From end Dec to
peak prices before last week) and from peak, silver is down 27%, cotton 29%,
oil 13%, while copper 13% (lead and zinc have been the worst performers in
base metals). Among base metals, aluminum which was a relative out
performer compared to other base metals has also seen a decline. We believe
the upcoming LME warehousing review report should be interesting in terms
of implications, particularly for aluminum which has the largest inventory
among base metals.
• The sell of so far- In equities: For Indian mining equities, the price damage
not surprisingly was limited, with base metal equities seeing modest decline,
while steel equities moving up. Given the oil price decline, Indian markets
have gone up, which have helped limit (so far) the impact with Indian MM
equities down 3-7% for the week. Globally the steel equities are down 4-6%,
while mining equities are down 6-12%.
• Mismatch between steel price and raw material prices continue: Spot Steel
prices remained weak (India HRC import prices from China and CIS in the
$640-680/MT range, implying domestic prices are still at a premium to
imports), while spot iron ore remain near $190/MT. The expected power cuts
in China over the course of the next 2-3 months would be key to watch in
terms of impact on production (across steel and base metals like aluminum).
JOM Global metals analyst Michael Jansen highlights-As the Chinese
economy moves into peak consumption phase and the weather is warmer the
prospect is high for an industrial and retail led spike in energy consumption
that leads to energy rationing. There are already signs of Beijing seeking to
limit power consumption from some heavy users; cement and smelting/refining
for instance.
• Indian steel market remains tough: One of India's leading steel companies
in its analyst conference call commented that they have had to increase
quantity discounts and also increase credit period (both on flat steel) given
weak demand. We believe this is an industry wide problem.
• Coal relatively better placed?: While admittedly seasonal factors are also at
play, coal inventory levels in both China (port inventory) and India (at plant
level) has come off sharply. Thermal coal prices have held up relatively better
(Newcastle thermal coal has held near $120-125/MT levels) over the last few
weeks. Elevated coal prices are negative for Indian aluminum and cement
companies given the import coal element and domestic e-auction coal
purchases.
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