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UBS Investment Research
Asia Steel Insights
M arket mixed now. But rebound in end Q3
Asia steel price still a mixed bag
CSC cut Sep domestic price by 1.6% on 13Jul which was a surprise as Baosteel
had kept Aug prices flat/up earlier in the week. China spot price modestly
rebounded (US$624/t excl VAT) but unlikely to break out of range. HRC price in
Korea though is down 1-2% (US$830-850) given high inventory, lack of demand
and increased supply.
China market to set to rebound in end Q
Amidst rhetoric to cut more capacity (31.2/27.9mt in iron/steel making capacity) in
2011, crude output hit record 737mt annualized rate in last 10days of June. This,
coupled with declining inventories suggests decent demand, especially for
construction. But rebounding auto sales bode well for the rather doldrums flat steel
market.
Key issues to watch
1) Earnings a key focus: Asian mills profits will be largely flat to up QoQ in CY
Q2 but fall sharply in Q3, while JP mills show flat QoQ both in CY Q2 and Q3; 2)
V shaped recovery in JP auto production to help improve Asian market at the
margin; 3) Ex-div for CSC on 18Jul. We see downside risk to share price given
potential earnings revision and capital raising.
Stock view: Asian steel price set to recover by end Q3, albeit modestly
We remove CSC from our most preferred list. We continue to have CMR, Tata
Steel and Sanyo Special Steel in our most preferred list, and Angang and Kobe
Steel as our least preferred list.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asia Steel Insights
M arket mixed now. But rebound in end Q3
Asia steel price still a mixed bag
CSC cut Sep domestic price by 1.6% on 13Jul which was a surprise as Baosteel
had kept Aug prices flat/up earlier in the week. China spot price modestly
rebounded (US$624/t excl VAT) but unlikely to break out of range. HRC price in
Korea though is down 1-2% (US$830-850) given high inventory, lack of demand
and increased supply.
China market to set to rebound in end Q
Amidst rhetoric to cut more capacity (31.2/27.9mt in iron/steel making capacity) in
2011, crude output hit record 737mt annualized rate in last 10days of June. This,
coupled with declining inventories suggests decent demand, especially for
construction. But rebounding auto sales bode well for the rather doldrums flat steel
market.
Key issues to watch
1) Earnings a key focus: Asian mills profits will be largely flat to up QoQ in CY
Q2 but fall sharply in Q3, while JP mills show flat QoQ both in CY Q2 and Q3; 2)
V shaped recovery in JP auto production to help improve Asian market at the
margin; 3) Ex-div for CSC on 18Jul. We see downside risk to share price given
potential earnings revision and capital raising.
Stock view: Asian steel price set to recover by end Q3, albeit modestly
We remove CSC from our most preferred list. We continue to have CMR, Tata
Steel and Sanyo Special Steel in our most preferred list, and Angang and Kobe
Steel as our least preferred list.
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