Metal and Mining share price target

Basing Renewed Strength

demand. Steel realisations would increase by 2.5% QoQ/Rs1,500/t, falling short of expected rise of 10% QoQ/Rs4,500/t in costs on account of higher coking coal cost. Owing to higher costs partially offset by increase in realisations, EBITDA margins would fall by 14% QoQ/Rs3,130 to Rs19,880. Chinese demand environment weak; supplies equally controlled: Chinese steel demand is estimated to fall by 4.7% YoY in CY21e at ~955mnt due to weakness in housing and auto sector, compounded with little support from Govt's spending. Govt's key agenda of curbing carbon emissions along with restricting...

In Q3FY22E, base metal prices (except lead) improved both QoQ, YoY. During the quarter, average zinc prices on LME were at US$3356/tonne, up 28% YoY, 12% QoQ, while average lead prices were at US$2326/tonne, up 22% YoY but down 0.3% QoQ. In the quarter, average aluminium prices on LME were at US$2754/tonne, up 44% YoY, 4% QoQ while average copper prices on LME were at US$9704/tonne, up 35% YoY, 3% QoQ. Aggregate EBITDA, EBITDA margins likely to soften QoQ For Q3FY22E, we expect the aggregate topline of coverage companies to...

While demand deceleration in China has resulted in price correction, we expect sharper production cuts to constrain exports

During Q2FY22E, base metal prices (except copper) improved both QoQ and YoY. During the quarter, average zinc prices on the LME were at US$2991/tonne, up 28% YoY, 3% QoQ, while average lead prices were at US$2332/tonne, up 25% YoY, 10% QoQ. Similarly, during the quarter, average aluminium prices on the LME were at US$2646/tonne, up 55% YoY, 10% QoQ while average copper prices on the LME were at US$9382/tonne, up 44% YoY, but down 3% QoQ. Aggregate EBITDA margins to increase QoQ, YoY...

We expect EBITDA of our coverage universe to grow 11% QoQ on back of higher volumes. Steel realisations would grow by 2.3% QoQ/Rs1,550/t. While costs are expected to increase by 8.2% QoQ/Rs3,365/t due to higher coal cost. Sales volume is expected to grow by 18% QoQ due to unleash of pent-up demand with lockdown relaxations. Owing to higher costs partially offset by increase in realisations, EBITDA margins of steel companies under our...

Metals & Mining: Steel sector may face contagion risk from China property sector

Lead indicators of Chinese demand for steel continue to worsen. Weak real estate data as well as contagion fears on account of debt defaults in the high-yield developer market, sets a context for the current steel production cuts. Risk-reward in steel equities is further worsened by the precipitous fall in iron ore prices. The last cost support for steel is in elevated coking coal prices and it appears that it is only a matter of time, given the current pace of Chinese steel production decline, that coking coal starts to correct.

Credit event at Evergrande has potential to spread contagion risk to property sector, though China can possibly manage the situation