Metal and Mining share price target

Top Sector Ideas - Metals and Mining (Q2FY24)

HRC price in the traders’ market was down slightly, as festive season weakness in the construction segment weighed on sentiment. Besides, the influx of imports, particularly from Vietnam, resulted in ample supply in the domestic market. Rebar prices in the primary market also dropped by INR 400/te; however, the secondary market showed some signs of stability.

Constellium’s (CSTM) Q3CY23 performance fell short of street estimates mainly due to lower shipments. Key points: 1) Adj. EBITDA stood at EUR 168mn (up 5% YoY) compared to consensus estimate of EUR 180.6mn; 2) the impact of lower shipments was partially offset by better product mix; and 3) management mentioned inflationary pressure and demand headwinds in several key markets still persist.

HRC spot spread has slipped to a seven-month low as prices dither and coking coal price rose by USD7/te WoW. Rebar prices have fared relatively better in the primary market and HRC-Rebar spread is down further to INR 1,600/te. In our view, the slow demand during the festive season and the recent influx of imports from Vietnam is likely to keep HRC prices under pressure in the near term.

HRC price in traders’ market rose for 11th week in a row to nearly INR 58,000/te- the highest level since May‘23. Longs price in primary market rose further by INR 500-600/te. Our channel checks indicate demand has picked up steadily since Aug’23, particularly in construction and infrastructure segments.

China’s trade data for Aug’23 was impacted by weak economic growth in key industries and typhoon Doksuri. Key points: 1) Refined copper imports declined 5% YoY, while copper concentrate/ore imports rose 19% YoY as domestic producers ramped-up output amidst weak demand; 2) coal imports shot up to a record 44.3mt (up 51% YoY) on lower hydroelectric generation; 3) steel exports surged 35% YoY to 8.28mt; and 4) iron ore imports were up 11% YoY aided by the expectations of steel demand uptick from Sep’23.

HRC prices in traders’ market rose by INR 900/te while rebar prices in primary market rose by INR 2,500/te in the week ended Sep 06, ’23, mirroring the hike taken by major steel producers. Despite coking coal price rising 2% WoW, spot spread inched up on a positive price-cost spread.

HRC prices in the traders’ market rose slightly by INR 270/te in the week ended 30th Aug’23 on expectations of demand pick-up and low channel inventory. Spot spread however edged slightly lower as coking coal prices also rose by USD 2/te WoW. In longs, major steel producers hiked prices for the third time during the month as secondary rebar prices are up 10% MoM on an average.