Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sesa (NR) conference call highlights domestic iron ore supply problems in
South India: SESA commented in its conference call that prices of its domestic
iron ore in Southern India has moved up and above export parity (adjusted for
railway freight and export duty). We believe this is driven by the sharp
reduction in domestic mine supply in the Bellary Hospet region given continued
regulatory issues. Exports have not started yet.
Even as cost curve for domestic steel moves up, sponge iron prices increase,
steel imports decline and steel exports increase- domestic HRC prices
REFUSE to move up: This in our view highlights the twin problems of new
supply from recent capacity commissiongs and sharp slowdown in demand.
Essar Steel (NR) reported April-June crude steel production growth of 40% to
1.17MT, while flat rolled finished steel production increased 35% to 1.07MT.
JSW has recently commissioned its new BF. In this background, we believe a
surge in domestic demand (in our view a V shaped demand recovery back to 8-
10% anytime looks difficult) is required for domestic price recovery in flat steel.
Nucor results- Expect headwinds to ease in 4QCY11E: JPM North America
steel analyst Michael Gambardella expects (click here for report) sheet market
headwinds in the US to ease in 4QCY11E and beyond. Michael believes a
narrowing US-China HRC spread suggests prices are bottoming, thus reducing
imports.
Metals forecasts- Gold, Silver and Aluminum see significant forecast
change: JPM Global metals analyst Michael Jansen (click here for report)
remains ‘extremely bullish on gold, looking for a move towards $1800/MT, and
above, by year end’. Aluminum forecasts also see upward revisions essentially
on anticipated cost inflation feeding through to higher LME prices, while
recovery in 2011 Chinese production has undershot expectations. Aluminum
prices in China are near YTD highs. Globally smelting utilization levels are in
low 80s.
Iron ore price- Short term gets better, demand continues to remain good,
while supply gets pushed out: JPM iron ore team led by Rodolfo De Angele
have-‘ (a) higher short-term prices; (b) we are delaying the start of the decay
into normalized prices from ’13 to ’14 and; (c) we are bumping our long-term
prices to $80/ton C&F (from $70/ton previously). Importantly Rodolfo
highlights that ‘The challenges to deliver new capacity remain in place. Projects,
with a few exceptions, continue to be late to market, especially when we
consider projects from the junior miners. We have tracked the execution of
junior miners in three different points in time: first in April/10, then in Oct/10
and finally in April/11. The expected tonnage of new capacity coming from the
junior miners has been consistently late. In our view, a more balanced
supply/demand equilibrium will only be seen when these projects start to
become a reality, and it seems to us that that will only happen, at the earliest, by
2014, which is when now we consider iron ore prices start to move down to
normalized levels. This is one of the changes that we have made to our pricing
assumptions. Previously we had prices starting to normalize by ’13’.
The impact of the financing trade in Aluminum- As per Michael Jansen-‘The
most important is that much of the global surplus in primary aluminum is in the
west and this surplus is consistently not being made available ex-smelter to the
consumer. The smelting industry is inextricably tried into the warehousing and
financing arrangement whereby smelters are paid an up-front inducement to sell
metal to warehouses, who in turn organize traders and/or investors to store it in
the LME-approved warehouse for a period of time at moderately below market
rental rates, with the holders of the metal choosing to do so in order to store,
insure and finance the metal at a lower cost than the contango market structure
prices. This ‘cash and carry’ mechanism is thus sucking metal into the LME
warehousing community at significant inducements to the smelters who are then
left with a pool of metal that is less significant to sell to customers. This practice
of selling to the LME warehouse helps to restrict the supply of metal (for the
consumer) as it is being produced while also holding the metal back from the
consumer while it is in-warehouse. As such it has been a strongly positive factor
in driving physical premia higher in a number of key consuming locations.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sesa (NR) conference call highlights domestic iron ore supply problems in
South India: SESA commented in its conference call that prices of its domestic
iron ore in Southern India has moved up and above export parity (adjusted for
railway freight and export duty). We believe this is driven by the sharp
reduction in domestic mine supply in the Bellary Hospet region given continued
regulatory issues. Exports have not started yet.
Even as cost curve for domestic steel moves up, sponge iron prices increase,
steel imports decline and steel exports increase- domestic HRC prices
REFUSE to move up: This in our view highlights the twin problems of new
supply from recent capacity commissiongs and sharp slowdown in demand.
Essar Steel (NR) reported April-June crude steel production growth of 40% to
1.17MT, while flat rolled finished steel production increased 35% to 1.07MT.
JSW has recently commissioned its new BF. In this background, we believe a
surge in domestic demand (in our view a V shaped demand recovery back to 8-
10% anytime looks difficult) is required for domestic price recovery in flat steel.
Nucor results- Expect headwinds to ease in 4QCY11E: JPM North America
steel analyst Michael Gambardella expects (click here for report) sheet market
headwinds in the US to ease in 4QCY11E and beyond. Michael believes a
narrowing US-China HRC spread suggests prices are bottoming, thus reducing
imports.
Metals forecasts- Gold, Silver and Aluminum see significant forecast
change: JPM Global metals analyst Michael Jansen (click here for report)
remains ‘extremely bullish on gold, looking for a move towards $1800/MT, and
above, by year end’. Aluminum forecasts also see upward revisions essentially
on anticipated cost inflation feeding through to higher LME prices, while
recovery in 2011 Chinese production has undershot expectations. Aluminum
prices in China are near YTD highs. Globally smelting utilization levels are in
low 80s.
Iron ore price- Short term gets better, demand continues to remain good,
while supply gets pushed out: JPM iron ore team led by Rodolfo De Angele
have-‘ (a) higher short-term prices; (b) we are delaying the start of the decay
into normalized prices from ’13 to ’14 and; (c) we are bumping our long-term
prices to $80/ton C&F (from $70/ton previously). Importantly Rodolfo
highlights that ‘The challenges to deliver new capacity remain in place. Projects,
with a few exceptions, continue to be late to market, especially when we
consider projects from the junior miners. We have tracked the execution of
junior miners in three different points in time: first in April/10, then in Oct/10
and finally in April/11. The expected tonnage of new capacity coming from the
junior miners has been consistently late. In our view, a more balanced
supply/demand equilibrium will only be seen when these projects start to
become a reality, and it seems to us that that will only happen, at the earliest, by
2014, which is when now we consider iron ore prices start to move down to
normalized levels. This is one of the changes that we have made to our pricing
assumptions. Previously we had prices starting to normalize by ’13’.
The impact of the financing trade in Aluminum- As per Michael Jansen-‘The
most important is that much of the global surplus in primary aluminum is in the
west and this surplus is consistently not being made available ex-smelter to the
consumer. The smelting industry is inextricably tried into the warehousing and
financing arrangement whereby smelters are paid an up-front inducement to sell
metal to warehouses, who in turn organize traders and/or investors to store it in
the LME-approved warehouse for a period of time at moderately below market
rental rates, with the holders of the metal choosing to do so in order to store,
insure and finance the metal at a lower cost than the contango market structure
prices. This ‘cash and carry’ mechanism is thus sucking metal into the LME
warehousing community at significant inducements to the smelters who are then
left with a pool of metal that is less significant to sell to customers. This practice
of selling to the LME warehouse helps to restrict the supply of metal (for the
consumer) as it is being produced while also holding the metal back from the
consumer while it is in-warehouse. As such it has been a strongly positive factor
in driving physical premia higher in a number of key consuming locations.
No comments:
Post a Comment