20130930-美银美林-Downgrade_steel_names_Thermal_coal_finally_stabilized_14页_909kb

Summary of Document Content

Core Content

The document provides an analysis of the Chinese metals, mining, and steel sector, focusing on recent price movements, inventory levels, and valuation metrics as of September 30, 2013. It also includes market performance data and recent company reports.

Main Views and Key Information

Steel Sector

• Price Trends:
  • Rebar price fell by 1.0% to RMB3,414/t.
  • HRC price remained flat at RMB3,545/t.
  • Social inventory decreased by 175kt to 13.6mt.
• Company Actions:
  • Angang and Maanshan were downgraded from Buy to U/P due to deteriorating margins.
  • The downgrade was based on lower P/B ratios (0.45x vs. 0.6x) and expected industry margin recovery to be capped by abundant supply.
• Market Outlook:
  • Steel prices are expected to continue falling.
  • Overcapacity could re-emerge, further pressuring prices and margins.
• Steel Prices:
  • HRC 5.5mm: RMB3,545/t, down 0.3% WoW and 11.9% YTD.
  • CRC 1mm: RMB4,386/t, flat WoW and down 6.5% YTD.
  • Rebar 20mm: RMB3,414/t, down 0.9% WoW and 6.6% YTD.
  • Wire Rod 6.5mm: RMB3,534/t, down 1.0% WoW and 4.1% YTD.
  • Plate 20mm: RMB3,542/t, up 0.2% WoW and down 7.9% YTD.
• Raw Material Prices:
  • Iron ore prices were more resilient than expected, up 3% WoW.
  • Coking coal prices were stable but with a bearish outlook for the long-term.
• Steel Production and Demand:
  • Crude steel production rose slightly to 66.3mn ton in August.
  • Demand indicators such as FAI and construction activity showed positive trends.

Thermal Coal Sector

• Price Trends:
  • QHD coal price was flat at RMB515/t.
  • QHD coal inventory declined to 5.88mt, down 1.5% WoW.
  • Shenhua and China Coal raised prices by RMB3-5/t for most coal products at ports.
• Market Outlook:
  • Thermal coal prices are expected to stabilize, with a milder and shorter price recovery.
  • Restocking has led to a bottoming out of thermal coal prices.
• Inventory Trends:
  • Major IPP inventory increased to 70mt by September 20, up from 63.5mt on August 31.
• Coal Prices:
  • QHD 5,500k: RMB515/t, down 16.3% YTD.
  • QHD 6,000k: RMB565/t, down 13.1% YTD.
  • Pac-Bohai-Rim Price Index: RMB531/t, down 0.4% WoW and 16.8% YTD.
  • Datong, 6,000k mine mouth: RMB342/t, down 25.2% YTD.
  • Datong, 6,000k FOR: RMB440/t, down 26.1% YTD.
  • Baotou, 5,000k FOR: RMB270/t, up 1.9% WoW and down 22.9% YTD.
  • Ordos, 5500, mine mouth: RMB310/t, down 19.5% YTD.
  • Australia, 5,500k FOB: US$65/t, down 13.1% YTD.
  • US Thermal Coal Exports, FOB US East Coast: US$75/t, up 0.3% WoW.
• Demand and Supply:
  • Coal consumption declined due to cooling weather.
  • Domestic coal production (raw) was at 300mn ton in August, down 6.8% YoY.
  • Shanxi production increased by 13.0% in August, while Inner Mongolia production rose by 15.7%.
  • Coal imports were at 22.3mn ton in August, up 29.1% YoY.

Coking Coal Sector

• Price Trends:
  • Prices were stable, with mixed outlooks.
  • Domestic coking coal prices were flat WoW.
• Market Outlook:
  • Weakening steel prices could affect coking coal demand.
  • Long-term coking coal prices are expected to be bearish.
• Coking Coal Prices:
  • Shanxi Liulin, #4 clean coal: RMB1,050/t, down 28.1% vs. 2012.
  • Shanxi Liulin, #9 clean coal: RMB930/t, down 31.8% vs. 2012.
  • Shandong Yanzhou, clean coal: RMB885/t, down 28.3% vs. 2012.
  • Shandong Jining, fat coal: RMB990/t, down 17.8% vs. 2012.
  • Sichuan Panzhihua, clean coal: RMB1,115/t, down 22.2% vs. 2012.
  • Yunnan Fuyuan, 1/3 clean coal: RMB990/t, down 28.0% vs. 2012.
  • Guizhou Liupanshui, clean coal: RMB1,120/t, down 21.8% vs. 2012.
• Seaborne Prices:
  • Premium Low Vol, CFR, China: US$170/t, down 22.9% vs. 2012.
  • Low Vol PCI, CFR, China: US$127/t, down 19.6% vs. 2012.
  • Semi Soft, CFR, China: US$114/t, down 18.6% vs. 2012.
  • Low Vol HCC, FOB US East Coast: US$137/t, down 1.4% YTD.
• Supply and Demand:
  • Domestic coking coal production was at 6.7mn ton in August, up 5.9% YoY.
  • Coking coal imports were at 6.3mn ton in August, up 144.8% YoY.
  • Australia was the largest importer of coking coal, at 2.5mn ton in August, up 311.2% YoY.
  • Transportation data shows a slight increase in BDI and QHD-Guangzhou Bulk rate.

Cement Sector

• Price Trends:
  • Cement prices rose in select regions, with increases of RMB10-30/t in Jiangsu, Zhejiang, and Anhui.
  • Chaohu and Hefei prices increased by RMB30/t, while Maanshan, Wuhu, and Liuan prices increased by RMB20/t.
  • Guizhou Guiyang lowered Grade-42.5 prices by RMB20/t.
• Market Outlook:
  • Further price hikes are expected in select regions.
  • Clinker prices in the Eastern area are likely to increase after National Day.
• Demand:
  • Demand indicators such as FAI and construction activity showed positive trends.
  • Apparent consumption was at 87.0mn ton in August, up 14.9% YoY.

Valuation and Market Performance

• Valuation Metrics:
  • Coal sector: Valuation ranges from 1.2x to 16.8x.
  • Steel sector: Valuation ranges from 0.4x to 10.6x.
  • Non-ferrous metals: Valuation ranges from 0.7x to 86.4x.
  • Cement sector: Valuation ranges from 0.6x to 11.3x.
• Market Performance:
  • Coal sector: Companies like China Shenhua-H and China Coal-H showed negative performance.
  • Steel sector: Angang-H and Maanshan I&S-H were downgraded.
  • Non-ferrous metals: Jiangxi Copper-H and Zijin Mining-H showed mixed performance.
  • Cement sector: Anhui Conch-H and CNBM showed negative performance.

Recent Publications

• Key Reports:
  • 29-Sep-13: Downgrade of JXC, Angang, Maanshan, and Zijin to U/P.
  • 26-Sep-13: Nine Dragons Paper Holdings reported in-line FY13 results.
  • 13-Sep-13: Cement sector heading to peak season.
  • 02-Sep-13: 3% import tax on brown coal, positive for domestic miners.
  • 01-Sep-13: Chalco reported in-line recurring loss.
  • 30-Aug-13: MMC reported a net loss and cut to U/P.
  • 29-Aug-13: Angang Steel reported net profit.
  • 28-Aug-13: Fushan reported earnings down 42% YoY.
  • 27-Aug-13: China Shenhua reported earnings down 7% YoY.
  • 23-Aug-13: CNBM reported slightly better 1H and financial cost issues.
  • 22-Aug-13: China Molybdenum reported lower costs and asset revamp.
  • 21-Aug-13: Cement sector reported weather impact study.

This summary captures the essential data and analysis presented in the document, focusing on the steel, thermal coal, coking coal, and cement sectors.