JP Morgan cuts iron ore price forecasts drastically

Wednesday, 23 Nov 2011

Market Watch reported that JPMorgan Chase & Co has trimmed its forecasts for iron ore prices by 10% to 15% for the next five years in response to lower expected demand for the steelmaking commodity.

JP Morgan has cut its average price forecast as under
2011- - By 6% to USD 167.40 a tonne
2012 - By 16% to USD147.50 per tonne
2013 - By 14% to USD 150 per tonne
2014 - By 11% to USD 125 per tonne
2015 - By 13% to USD 105 per tonne

The company said in a research report published Tuesday that “We believe that high cost Chinese production will keep its place in the market and support prices at above normal levels for some time. However, we have lowered our demand projections in line with our global economists' estimates of world growth and this results in lower price forecasts.”

JPMorgan said “The supply side remains supportive and supply disruptions and continued delays in projects by the junior miners make us confident that the iron ore prices are here to stay relatively high for a few years.”

JPMorgan said “Spot prices for the commodity have swung wildly in recent weeks, declining more than 30% over three weeks and then recovering about 26% from the bottom of USD 116.90 per tonne. Going forward, the recovery and the sustainability of iron ore prices will depend on the strength of recovery in demand from Chinese steel mills, a potential recovery in European steel demand and an overall improvement in the general macro-economic sentiment.”

(sourced from marketwatch.com)

CIL wage costs may rise 19pct this fiscal - JP Morgan

Thursday, 25 Aug 2011

Investment banking major JP Morgan said that state run mining giant Coal India, which is under pressure from labor unions for a salary hike, could see its wage costs rise by as much as 19% this fiscal.

JP Morgan in a research note said that "The wage cost increase from July 1 would impact the non executive segment, which is 85% of the wage bill. We are building in a total wage cost increase of 19% in FY12E, which includes the inflation impact and the wage agreement hike.”

Four of the five trade unions of Coal India have put up their wage demands to the management, demanding salary hikes ranging from 100% to 500% which is likely to put severe financial pressure on the company.

The current average basic salary of Coal India worker is about INR 8,320 per month.

While the Left-backed All-India Trade Union Congress has asked for a revised salary of INR 16,000 per month, the Hind Khadan Mazdur Federation has asked for a minimum revised basic salary of INR 40,000 per month.

At present, Coal India and its subsidiaries spend about INR 20,000 crore on salaries every year, accounting for over 40% of the cost of production.

The unions have also demanded better parity between workers on its payroll and workers on a contract, as well as between workers and officers.

(sourced from ET)

Essar Energy hit by project delays

Aug22,2011
* Still awaiting forest clearance for some coal blocks
* Says minor delays to three power projects
* Analysts say company faces a trust deficit after project hold-ups
* H1 EBITDA $477.9 million vs $467 mln consensus
* Shares fall 4.4 pct

LONDON (Reuters) - India-focused refiner and power generator Essar Energy said three projects would be delayed as it continues to battle hold-ups from regulators, hurting its shares.

The company said on Monday there would be "minor delays" to its Salaya I, Mahan I and Vladinar phase 2 power projects and that it is still awaiting forest clearance from the Indian government for its Mahan, Chakla and Ashok Karkata coal blocks which will provide fuel for the Mahan I and Tori power stations.

Shares in Essar traded down 4.4 percent to 246.3 pence, paring earlier losses of as much as 6 percent, and making the company the biggest loser on Britain's bluechip index .

"We believe that Essar Energy now faces a trust deficit and therefore there will be an even greater investor focus on project delivery times," said analysts at JP Morgan in a note.

Essar Energy said in its statement: "Delays to regulatory approvals and delays to the access of fuel supplies are a cause for concern."

"Not only do these delays impact the economic returns on projects, but they are acting to discourage investment in the sector from project sponsors, debt providers and equity investors."

For the six months ended June 30, the company posted earnings before interest, tax, depreciation and amortisation (EBITDA) of $477.9 million, up from $320.2 million last year, boosted by higher refinery margins.

This compared with a company-supplied anlayst consensus figure of $467 million.

JP Morgan said in a note that when measured on a current price basis, earnings missed consensus, having been negatively impacted by a foreign exchange loss in the company's oil and gas unit.

The FTSE 100 company was positive on the future of its refining business, saying it expected margins to stay at their current high levels to the end of 2011.

"Strong global demand, the earthquake in Japan and events in the Middle East and north Africa pushed up refining margins in the first half of 2011," the company said.

The company, which agreed to buy Royal Dutch Shell's (RDSa.L) Stanlow refinery in northwest England for $350 million in February, said its focus was on its Indian power projects and integrating Stanlow into its business.

"We do not have any plans for any further acquisitions of refineries in Europe or elsewhere," chief executive Naresh Nayyar said in a conference call with reporters.

Essar Energy, the majority shareholder in India-listed Essar Oil , is itself 77 percent-owned by privately-held Indian conglomerate Essar Group.

JP Morgan bullish on China commodities demand, warns on social tension

Tue Apr 5, 2011 4:34am GMT

SINGAPORE, April 5 (Reuters) - Social tension in China remains an investment risk as strong demand for coal, grains and copper pushes up commodity raw material prices, Jin Ulrich, J.P. Morgan China managing director, told a conference on Tuesday.

"Investors are always looking for the potential risks that have not been discounted," Ulrich said.

"One area that we need to pay attention to is social tension. That's why the government is targetting low-income housing and inflation control to try to ease the social tension that exists."

China plans to spend $200 billion over the next five years to build 36 million units of low-income housing units, Ulrich said, citing the country's latest five-year plan. (Editing by Ed Lane)

ANALYSIS-Japan nuclear crisis stirs worries about leadership vacuum

Mon Mar 28, 2011 10:02am GMT

By Linda Sieg

March 28 (Reuters) - Who's running the show as Japan grapples with its worst crisis since the end of World War Two?

Concerns are growing over an apparent leadership vacuum as Japan fights to prevent catastrophe at a crippled nuclear plant and recover from the deadly earthquake and tsunami that has devastated the country's northeast.

Engineers have been battling to stabilise the Fukushima nuclear complex since it was damaged by the massive March 11 quake and tsunami, but operator Tokyo Electric Power Co (TEPCO) has conceded it faces a prolonged and risky operation to avert a disastrous meltdown at the plant, 240 km (150 miles) from Tokyo.

"This nuclear accident needs to be dealt with as a national security issue, not just a problem for TEPCO, and solved as soon as possible," said Toshiro Muto, a former Bank of Japan deputy governor who is now chairman of the Daiwa Institute of Research.

Underscoring public angst, a Kyodo news agency poll released on Sunday showed nearly 60 percent of respondents disapproved of the government's handling of the nuclear crisis and almost two-thirds felt Prime Minister Naoto Kan was not exercising leadership.

"It is quite clear that the vested interests are too entrenched and the characters involved are too weak to take decisive actions and responsibility in the sense of forward-looking, pragmatic action," said Jesper Koll, director of equity research at JP Morgan Securities.

He said Japan should turn to nuclear experts from around the world to help them stabilise a situation that, if anything, appears to be getting worse.

Frustration is also growing among those who have fled their homes near the plant. The government has ordered those within a 20 km (12.4 mile) radius to leave and is encouraging those living in a 20-30 km ring to do the same.

"The scary thing is the radiation," said Mitsuharu Watanobe, a retired high school teacher who had to leave his home about 25 km from the damaged complex. "There is a gap between what the newspapers write and what the government is saying. I want the government to tell the truth more."

Chief Cabinet Secretary Yukio Edano has received praise for his performance as top government spokesman, keeping the public up to date on the crisis in twice-daily news conferences.

But few think the 46-year-old lawmaker is running the show.

And the information he can share is only as reliable as what he is told by TEPCO and regulators, whose comments are often conflicting and confusing.

On Monday, Edano berated TEPCO for announcing what turned out to be mistaken radiation readings, calling the error "absolutely unforgiveable".

Asked later if the pressure vessel at one of the reactors was damaged, he referred the query to the nuclear safety agency.

Analysts said the government seemed to be leaving TEPCO, which has had a rocky past of suspected false reports, too much in control and that coordination among the government, regulators and the firm was messy.

Kan, for his part, has given three news conference since the disaster struck but has otherwise mostly stayed out of public view. He has not yet visited the tsunami-hit northeast, although media said he now plans to do so on April 2.

The prime minister has come under fire for flying over the nuclear complex a day after the tsunami, although Edano denied reports that the flight delayed steps to cope with the accident.

In a sign the government was feeling overwhelmed, Kan on Saturday appointed Sumio Mabuchi, an ex-transport minister as a special advisor on the nuclear crisis.

That followed the appointment of his former No.2 minister, Yoshito Sengoku, as a deputy to Edano to beef up relief and reconstruction efforts. The quake and tsunami have left more than 27,000 dead or missing and one quarter of a million people living in shelters in a stricken swath of northeastern Japan.

Mabuchi and Sengoku lost their cabinet posts in January after being censured by the opposition-controlled upper house of parliament for their handling of a territorial row with China.

"There is no one looking at things overall," said Hirotaka Futatsuki, an independent political analyst. "Things are proceeding piecemeal and Kan is not exercising general control." (Reuters)

Coal of Africa debt restructure

CEO says company will not go back to the market to keep wheels rolling

Thu, Mar 17, 2011 06:53:32 AM
By Allan Seccombe, Business Day

COAL of Africa (CoAL) will announce details of a new debt structure in coming days ahead of a $20m debt repayment to JPMorgan on March 24, plus raise extra cash to give the company "headroom" for its other projects, CEO John Wallington said yesterday.

CoAL has seen its cash reserves dwindle to A23m ($22,6m) by the end of December last year from A$101m at the end of June last year and the group has put in strict cash control measures to rein in spending. Work on the new debt facilities are about 98% complete and are awaiting final signatures, Mr Wallington said.

"If it’s a rollover (of the $20m debt) or replacing it with another facility, one of them will happen. It’s in place. With that facility in place it will also soothe the unfortunate market fears that this company will have to go back to the market to keep the wheels rolling, which it won’t have to do," he said.

A combination of cost controls, revenue increases from rising coal prices, and the new debt facility will enable CoAL to continue "without any issues for the rest of the year", he said.

CoAL would consider an equity issue only as one of a number of fund-raising mechanisms to raise more than $500m to build its Makhado coking coal project in Limpopo, he said. The hurdles that need to be cleared first are securing mining rights and completing a definitive feasibility study after the testing of 4400 tons of coal at ArcelorMittal’s Vanderbijl park steel mill.

The new debt package will be more than $20m, Mr Wallington said. "We want to give ourselves the headroom to cater for bringing Vele back into production. That will need cash for two or three months until the coal revenues start flowing.

"We also need cash to continue exploration and complete the Makhado feasibility," he said.

CoAL has spent about R600m on Vele, a coking coal mine near the Mapungubwe national heritage site, but the mine was stopped in its tracks just months before commissioning. It received a compliance notice from the Department of Environmental Affairs in August last year.

CoAL had adhered to all the requirements in the notice as well as all legislative matters, Mr Wallington said. The mine could resume "imminently", he said, without being drawn on any more specific time line.

"There is a campaign for the government to have a clearer policy about mining and industrial development in areas that are considered environmentally sensitive. Vele has become a test case for that," he said.

CoAL needs to spend R80m more to complete the mine, which will produce up to a million tons a year of soft to medium-hard coking coal suitable for steel mills. It may produce only half that to start with because it has been unable to secure agreements with Transnet on rail allocation, he said.

Gold, iron ore to rise; copper to stay steady

Monday, 07 Mar 2011
By Euan Rocha and Julie Gordon (Reuters)

Forecasters addressing the opening day of the PDAC conference said safe haven buying should lift gold through record highs while iron ore is likely to regain momentum on the back of continued demand from Asia

TORONTO (Reuters) -

Gold should push higher from its near-record levels due to its appeal as a safe haven, while iron ore should regain its upward momentum on the back of red-hot industrial demand from Asia, forecasters told the world's larger mining conference on Sunday.

Copper, an economic bellwether due to its industrial versatility, should be well supported at its current lofty levels but may have trouble pushing significantly higher as mine production races to catch up to demand growth, they said.

Addressing the Prospectors and Developers (PDAC) conference in Toronto, forecaster Philip Klapwijk said he saw a "stronger case for investment in precious metals as a safe haven" as demand for base metals declines due to slowing global growth and political turmoil.

Klapwijk, chairman of metals consultancy GFMS, also said he expected global GDP growth to slow slightly this year as compared with last year.

Prices for gold and silver have risen sharply since the outbreak of violence in the Middle East and North Africa earlier this year as buyers turned to precious metals as a haven from risk.

Gold XAU= is holding within $10 of the record above $1,440 an ounce it set on Wednesday, while silver XAG= extended 31-year highs above $35.40 an ounce on Friday.

JPMorgan analyst Michael Jansen told a room packed to overflowing with more than 500 delegates -- from corporate chief executives to geologists to fund managers -- that he expects gold prices to average $1,465 an ounce this year.

His year-end target for gold is $1,500, he said, adding the gold production outlook was strong going forward.

"We think mine supply is easily on track to grow 3 to 4 percent year on year," he said."

His forecast is slightly more subdued other predictions, such as by Barclays Capital, which said in January it expects the metal to average $1,495 an ounce this year, and range as high as $1,620 an ounce.

GFMS said in a January quarterly forecast that gold may top $1,600 an ounce by the end of 2011.

Klapwijk said gold and other precious metals will also get some impetus as investors exit other traditional safe havens.

"We expect the sovereign debt crisis will not be confined to Europe and it will eventually spread to the U.S. and Japan ... It seems to be inconceivable that the U.S will be able to continue on its current path and maintain its 'AAA' rating," Klapwijk added.

More than 20,000 people are in Toronto this week for the annual PDAC conference. Attendance grows every year at the event, a key barometer of mining investment appetite. This year it has also attracted a handful of top government ministers from key mining jurisdictions.

CHINA LEADS DEMAND

As presenters rolled out their outlook from everything from gold to iron ore, and uranium to potash, there was one key word was in almost every presentation -- China.

Demand from the world's most populous country will help underpin demand for iron ore, the main steelmaking ingredient, said Phil Newman, chief operating officer of consultancy group CRU.

He said 95.1 pct of global steel production growth between 2007 and 2021 will be in Asia.

Iron ore spot prices IODBZ00-PLT surged to record highs near $200 a tonne in mid-February, but have since come off their highs to trade around $178 a tonne.

Newman said he expects prices to resume their upward push, but perhaps not until later in the year.

"Certainly in the first half of 2011 we see continued price pressures," he said.

"The good times will continue, but we are approaching an inflection point," he said, referring to in iron ore. ... Over the medium term (around 2015), we see prices drifting lower,"
COPPER DEMAND AND SUPPLY TO GROW

GFMS forecaster Mark Fellows pointed to strong fundamentals underpinning copper prices, but he did not see big near-term gains from a metal that has been on a steady upward churn.

Copper CMCU3 for three-month delivery on the London Metal Exchange has risen by two-thirds since June, hitting an all-time high of $10,190 per tonne in mid-February on concerns that demand for the metal will outstrip miners' ability to produce it.

Fellows said he expects a growing deficit in copper market in the second half of this year, with the market staying in deficit in 2012 and 2013.

He said refined copper consumption should grow 3.8 percent annually between 2011 and 2013, up from 2.6 percent in the past decade. Mined copper production growth of 3.8 percent between 2011 and 2013, well up from 2 percent production growth in the past decade, he said.

(sourced:Thomson Reuters )

Nippon Steel, S'tomo Metal pick merger advisers -sources

Mon Feb 28, 2011 4:59am GMT

TOKYO Feb 28 (Reuters) - Nippon Steel Corp (5401.T: Quote) has picked Mizuho Securities (8606.T: Quote), Mitsubishi UFJ Morgan Stanley, JP Morgan (JPM.N: Quote) and Bank of America Corp's (BAC.N: Quote) Merrill Lynch to advise it on its planned merger with Sumitomo Metal Industries (5405.T: Quote), sources told Reuters.

Sumitomo has hired Nikko Cordial Securities, a unit of Sumitomo Mitsui Financial Group (8316.T: Quote), Daiwa Securities Group (8601.T: Quote), Goldman Sachs Inc (GS.N: Quote) and Deutsche Securities (DBKGn.DE: Quote) to advise it on the planned union, five sources familiar with the matter said. (Reporting by Emi Emoto; Writing by Tim Kelly,sourced:Thomson Reuters)

Tags: Daiwa Securities group, advice for planned mergers, Nikko Cordial Securities, Sumitomo Mitsui Financial Group, Daiwa Securities Group, Goldman Sachs Inc, Deutsche Securities

China to account for 9pct of global acquisition deals - JPMorgan

Sunday, 27 Feb 2011

Bloomberg citing Mr Brian Gu head of JPMorgan China M&A unit China should account for 8 to 9 percent of global mergers and acquisition activity this year, continuing close to its strong levels in 2009 and 2010.

He said Consolidation in the consumer retail, real estate, healthcare, and chemical and industrial sectors are likely to power China's domestic M&A this year. China's inbound and outbound M&A deals in 2010 amounted to USD 236 billion out of a global total of USD 2.8 trillion or a little more than 8%.

Mr Gu said "Amid an overall recovery in M&A activity globally, China has seen a sharp rise, taking advantage of the financial crisis and maintained a pretty large share in this rebounding market last year."

He said that "Overall China as a large component of global M&A activity, is here to stay."

Mr Gu said China will probably continue its performance in outbound M&A after chalking up a record USD 54 billion in 2010. He said that recent stumbles by Chinese firms seeking to acquire all or part of foreign companies, such as Huawei's attempt to acquire server technology firm 3Leaf and Xinmao Group's play for the Dutch cable maker Draka shouldn't cast a shadow on future outbound Chinese deals.

He added that "China has always regulated inbound M&A from a security perspective."

Mr Gu said "I don't think this changes the regulatory environment; it doesn't mean it's more stringent or looser. I think it does lay out a protocol that parties can actually point to as to the process by which they'll be evaluated."

JPMorgan handled the largest volume of cross-border Chinese M&A last year with a transaction volume of USD 11.1 billion or 10.6% of the market, according to Dealogic. Credit Suisse was a close second with USD 10.7 billion or 10.2%.(sourced:bloomberg)

India SAIL chair:to launch share sale by end-March

Thu Feb 3, 2011 12:36pm GMT

* Decision on banks to be taken early next week
* SAIL expected to retain all banks-sources

MUMBAI Feb 3 (Reuters) - State-run Steel Authority of India's (SAIL.BO: Quote) upto $1.9 billion share sale could be launched by end-March, after the steelmaker takes a final decision early next week on lead managers for the offer, its chairman said.
The government had issued notices last month to some of the shortlisted banks for the SAIL offering, asking if there was any conflict of interest, after they also managed rival Tata Steel's $770 million share sale.

"We discussed the legal position. We will be in a position to take a final decision by early next week," SAIL Chairman C.S. Verma told Reuters, after a meeting with government officials.
"We will still be able to launch the offer within this financial year."
The government will sell 5 percent in India's largest domestic steelmaker, which has an annual capacity of around 15 million tonnes. SAIL will issue new shares equal to 5 percent of its existing share capital, to fund expansions.
The government owns about 86 percent in the firm.
SAIL had earlier selected Deutsche Bank (DBKGn.DE: Quote), JP Morgan (JPM.N: Quote), HSBC (HSBA.L: Quote), SBI Capital, Enam Securities and Kotak Mahindra Capital to manage the share sale.

SBI, HSBC, Deutsche Bank and Kotak were also among the managers for the Tata Steel offer.
The state-run steelmaker is likely to retain all the banks for the share sale, two sources with direct knowledge of the matter told Reuters. (Reporting by Prashant Mehra and Sumeet Chatterjee; editing by Malini Menon, sourced:reuters)