Metal and Mining share price target

The US and China reached a temporary truce in their ongoing trade tussle in a meeting on December 1, 2018. The US agreed to leave tariffs on US$200 billion worth products at 10% rate and not raise it to 25% on January 1, 2019. Similarly, China also agreed to purchase a very substantial amount of agricultural, energy, industrial and other products from the US to reduce the trade imbalance between the two countries. Further, both countries agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual...

(All prices in US$/tonne, Indian HRC price denoted in |/tonne) Indian steel space to remain in sweet spot... Global steel demand likely to grow 3.9% in CY18, 1.4% in CY19 As per World Steel Association (WSA), while the strength of steel demand recovery witnessed in 2017 was carried over to 2018, risks have also increased. Rising trade tensions and volatile currency movements have led to increased uncertainty. The normalisation of monetary policies in the US and European Union (EU) are likely to influence currencies in...

(All prices in US$/tonne, Indian HRC price denoted in |/tonne) Over the last two months, Chinese steel exports witnessed a declining trend. For August 2018, steel exports were at 5.9 MT, down 9.8% YoY (vs. 6.5 MT in August 2017). Previously, in July 2018, steel exports declined 15.4% YoY to 5.9 MT (vs. 7 MT in July 2017). Cumulatively, over the last two months (July-August), Chinese steel exports declined to 11.8 MT, down 12.7% YoY from 13.5 MT a year ago. Previously, in 2017, the decline in Chinese exports supported global prices. China in CY17...

Steel HRS export Shanghai (FOB) prices fell 1% mom to US$575/t from US$580/t, while iron ore 62% grade prices rose 2% mom to US$62/t. Coking coal prices rose 7% mom to US$182/t due to stronger demand and logistics issues in Australia. China's manufacturing PMI increased to 51.3 from 51.2 last month, while Japan's rose...

(All prices in US$/tonne, Indian HRC price denoted in |/tonne) Chinese steel mills heading for winter cuts early China meets ~82% of steel capacity cut target for CY18 in April-July According to the National Development and Reform Commission (NDRC), China aims to cut coal and steel production capacity by 150 million tonne (MT) and 30 MT each, respectively, for CY18. Of this, during January-July 2018, the country has already reduced coal production capacity by ~80 MT while the steel sector witnessed a capacity cut of ~24.7 MT....

Non-ferrous prices volatile, flat steel price stable US, China trade tensions weigh on non-ferrous prices... As China is a major consumer of base metals, escalating trade tensions with the US have had a negative rub-off on the entire non-ferrous pack in terms of prices. During the month, zinc prices on the LME declined to US$2617/tonne (as on July 30, 2018), down 10% from US$2906/tonne (as on June 29, 2018). Lead, aluminium and copper prices also declined 11.1%, 3.6% and 6.1%, respectively, during the aforementioned period....

On March 5, 2018, the US announced a blanket imposition of tariff on imports of steel and aluminium applicable to all trading partners (which was going to be effective in 15 days) on the pretext of safeguarding the domestic manufacturing base and its national security. In mid-March, however, the US softened its stand towards Nafta trading partners Canada, Mexico, excluding them from the duty. The US further excluded the European Union, Australia, Brazil and South Korea from duties as they were to negotiate exemptions...

Quality will remain key focus w.r.t sourcing of steel-making Raw Materials - Iron Ore and Coking Coal. 62% grade Iron Ore is currently 57% more expensive v/s 58% grade Iron Ore. This is structural given China's environmental concerns. In the Non-ferrous space, prices of all metals increased, except Gold. Copper, Aluminium, Zinc and Lead prices increased by 2.6%, 2.2%, 1.9% and 6% mom, respectively. Vedanta's copper unit at Tuticorin has been shut down due to environmental concerns. Domestic steel prices are likely to remain strong on the back of improving demand, weak INR and stable global prices. Weak INR will also support non-ferrous metals companies....

Aluminium prices during the month of April-18 remained volatile taking cues from the developments over US sanctions targeting Russian companies including United Company RUSAL In the first week of April, US imposed sanctions against Oleg Deripaska and his controlled entities. Oleg Deripaska currently holds a majority stake in RUSAL. The company produced 3.7 million tonne (MT) of aluminium in CY17, accounting for ~6% of world's total supply. The sanctions prohibited individuals/investors/entities, US or...

On March 5, 2018, the US announced a blanket imposition of tariff on imports of steel and aluminium applicable to all trading partners (effective in 15 days) on the pretext of safeguarding the domestic manufacturing base and its national security In mid-March, however, the US softened its stand towards Nafta trading partners Canada, Mexico, excluding them from the duty. The US indicated it remains open to modifying or removing tariffs for individual countries if the same is proved to be in US national interest....