Published on 2/03/2017 3:27:48 PM | Source: Emkay Global Financial Services Ltd

Metallica - Metal Price move slowing down - Emkay

Posted in Broking Firm Views - Sector Report| #Metals Sector #Emkay Global Financial Services Ltd. #Sector Report

Metal Price move slowing down!!

Key observations

* Iron ore prices continued to rise sharply despite being in oversupplied market and concern over Chinese steel capacity cuts. Coking coal prices however fell further, though with a lesser intensity

* Globally steel prices remained broadly stable without any bigger movement. In India, while, flat products could not see any meaningful improvement, long products and semis prices improved. Domestic iron ore prices too rose, while Mn ore prices declined .

* In case of non- ferrous metals, price of aluminium rose while copper remained flat. Zinc and lead prices fell during the month. Aluminium physical premium is likely to get stronger. Copper prices can get stronger, while Tc/ Rc may remain weak.

* Domestic steel demand continues to remain weak, while supply is up. Anti- dumping duty however, has been supporting prices. Non- ferrous metals prices are likely to stabilize. We prefer Hindalco, Vedanta and MOIL.


Emkay view

* Steel prices globally remained flat broadly. The sentiment however, still continues to be upbeat. The CIS HRC (fob Black Sea) prices closed flat this month at US$485/ tonne unchanged from closing value of the previous month. Chinese HRC prices however, rose by 3% to US$633/ tonne. Due to recent sharp rally in steel and allied raw material prices, the Chinese authorities were planning to put curbs on speculative activities. Any action in this regard can weigh on the prices.

* Coking coal prices continue to fall as supply normalizes and speculation fizzles out. Any extension in Chinese policy to restrict mining activities to control pollution can support coking coal prices. In case of iron ore, rally continues despite higher supply. 62% Fe grade ore surged by 9.5% in the month to close at US$91.3/ tonne and 58% Fe grade ore added 6.6% to close the month at US$74.5/ tonne. Manganese ore prices however, continued to weaken on higher supply and weak demand.

* Non- ferrous metals prices saw a mixed trend. Aluminium is the only metal, which gained 4% while copper closed flat. Zinc and lead prices on the other hand fell by 1.2% and 3.4% respectively. Physical premiums have been flat but are likely to get stronger. Overall, we believe zinc and aluminium prices should stabilize.

* Domestic steel prices have been strong primarily on account of anti- dumping duty, as demand has still been weak so far. As per our channel checks, price hike in flat products could not be passed on to the customers fully. In the long product segment, however there has been rise in prices recently. Non- ferrous metals prices are likely to remain steady. Coal prices also are likely to remain stable. We continue to prefer Hindalco, Vedanta and MOIL based on the scope of better operational improvement. 


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