Iron ore softens amid weak steel market; coking coal contracts up 47% - Motilal Oswal
Wed, Mar09, 2011 03:03:32
Steel prices in most regions softened during the week. Indian CR grade HRC declined 0.5% WoW and commodity grade HRC was flat.
Spot iron ore prices declined 7% WoW. India's increasing export duty on iron ore fines from 5% to 20% did little to support iron ore prices.
According to media reports, Anglo-American settled coking coal contracts with Japanese mills at US$330/t FOB (+47% QoQ) v/s expectation of US$325/ton.
New prices will hit the P&L of steel companies with a lag of one or two quarters depending on spacing of contacts.
We expect margins to expand in 4QFY11 and remain superior in 1QFY12 followed by compression in 2QFY12.
JSW Steel reported crude steel production of 541,000, an increase of 8% YoY. This is marginally lower than our expectation. Production of HRC and rolled products was robust, and long products appear to be weak. Base metal prices increased 2-3%. Aluminum prices rose on falling inventories. Copper declined on rising oil prices and escalating violence in North Africa.
(Source: Equity Bulls)
Tags : Japan steelmakers, raw material, steel mills
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