Metal and Mining share price target

Spot HRC spread for sheet steel players has risen further in the week ended 26th Apr’23 compared to last week on falling coking coal prices. While HRC prices are broadly stable WoW in the traders’ market, coking coal prices are down by a further US$13/te, lowest since Aug’22.

Spot HRC spread for sheet steel players has risen to an 8-month high on falling coking coal prices. While HRC prices are down by Rs200/te WoW in the traders’ market, coking coal prices are down by a further US$13/te, implying an overall benefit of Rs800/te.

HRC prices in traders’ market rose by Rs500/te WoW as hikes taken by major steel players in end-March’23 got absorbed in the market. Spot spread has additionally improved as coking coal price has corrected further by US$8/te. That said, export prices have corrected by US$10-15/te, tracking slower than expected demand recovery in China.

Q4FY23 is likely to see margin improvement led by higher prices and lower/flat coal costs: 1) Ferrous EBITDA (especially for flats) is likely to benefit from higher realisation and stable coking coal cost; 2) Volume growth likely to remain subdued as demand picked up only post Feb-23.

HRC prices in the traders’ market rose by Rs500/te WoW mainly due to hike of Rs1,000~1,500/te taken by major steel players across the flat products segment. Besides, coking coal prices corrected by a further US$18/te WoW due to reluctance from Chinese and Indian Steel producers.

HRC prices in the traders’ market fell by Rs300/te WoW to the lowest level in a month mainly on subdued market activity due to local holidays. Nevertheless, spot HRC spread expanded as coking coal prices declined to US$300/te (down US$20/te WoW).

HRC prices in traders’ market have sustained at Rs60,000/te for third week in a row on positive global cues and signs of demand revival in China. Spot spread was aided by coking coal price dropping to US$322/te. Rebar-HRC premium has contracted further to Rs1,740/te- lowest since Nov-22 owing to firm global HRC prices.

We summarise key takeaways from our interactions with ArcelorMittal (MT NA) and Alcoa (AA US)

Aluminium prices to remain in a tight range of US$ 2,300-2,500/t in H1CY23, as per our global channel checks