Morning Bites (part 1)
📌CISA mills’ daily crude steel output rose 0.9% in the last ten days of May from the second ten days of the month. This represented a 1.5% YoY increase (vs. the 3.4% YoY decline in mid-May). The increase might have been caused by demand recovery amid the easing COVID restrictions and the announcement of economic stimulus measures. Demand revival was shown by the 10.2% reduction in steel inventories from 20 to 31 May (up 33.8% YoY). We note, however, that in the coming months, China’s steel manufacturers might be forced to lower their output run-rates in order to achieve the targeted steel output reduction in 2022 relative to 2021
📉Gold-backed ETFs reduced their holdings through May, with net outflows at 51t, partly on the back of rising fund rates. In April, ETFs increased their holdings by 33t. We note, however, that in the coming months gold investment demand might be supported by the rising inflation
#China #steel #ETF #gold
📌CISA mills’ daily crude steel output rose 0.9% in the last ten days of May from the second ten days of the month. This represented a 1.5% YoY increase (vs. the 3.4% YoY decline in mid-May). The increase might have been caused by demand recovery amid the easing COVID restrictions and the announcement of economic stimulus measures. Demand revival was shown by the 10.2% reduction in steel inventories from 20 to 31 May (up 33.8% YoY). We note, however, that in the coming months, China’s steel manufacturers might be forced to lower their output run-rates in order to achieve the targeted steel output reduction in 2022 relative to 2021
📉Gold-backed ETFs reduced their holdings through May, with net outflows at 51t, partly on the back of rising fund rates. In April, ETFs increased their holdings by 33t. We note, however, that in the coming months gold investment demand might be supported by the rising inflation
#China #steel #ETF #gold
Morning Bites (part 2)
💍US jewellery and watch sales rose 18% YoY in April, according to US Department of Commerce data. The growth rate accelerated from the revised 11% YoY increase in March. Growing jewellery sales might be positive for diamond prices; however, we note risks to the downstream demand amid surging inflation
💎De Beers raised the prices of smaller rough diamonds 5-7% at its 5th sales cycle in 2022, according to Bloomberg. The price increase was caused by the shortage of rough diamonds amid sanctions on Alrosa, which accounts for some 30% of the rough diamond market. We note that further price hikes are possible, given the jewellery demand remains strong
#diamonds
💍US jewellery and watch sales rose 18% YoY in April, according to US Department of Commerce data. The growth rate accelerated from the revised 11% YoY increase in March. Growing jewellery sales might be positive for diamond prices; however, we note risks to the downstream demand amid surging inflation
💎De Beers raised the prices of smaller rough diamonds 5-7% at its 5th sales cycle in 2022, according to Bloomberg. The price increase was caused by the shortage of rough diamonds amid sanctions on Alrosa, which accounts for some 30% of the rough diamond market. We note that further price hikes are possible, given the jewellery demand remains strong
#diamonds
Morning Bites (part 3)
📌According to World Platinum Investment Council (WPIC), the platinum market surplus in 2022 is unsustainable. First of all, WPIC sees risks to Russia’s platinum supply (10% of total). Secondly, WPIC expects a strengthening of platinum demand due to palladium-for-platinum substitution in petrol car catalytic converters and the increased platinum use in hydrogen energy industry. Still, WPIC forecasts platinum market surplus of 627koz in 2022
#PGMs
📌According to World Platinum Investment Council (WPIC), the platinum market surplus in 2022 is unsustainable. First of all, WPIC sees risks to Russia’s platinum supply (10% of total). Secondly, WPIC expects a strengthening of platinum demand due to palladium-for-platinum substitution in petrol car catalytic converters and the increased platinum use in hydrogen energy industry. Still, WPIC forecasts platinum market surplus of 627koz in 2022
#PGMs
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📉What falling global steel consumption could mean for the economy
📝Steel is mostly used in the early stage of construction, both for property and infrastructure. As such, steel demand dynamics can be treated as one of the leading indicators of economic growth. We now see a significant slowdown in steel demand: -9% in 1Q22 in China, due to lockdowns, and, more importantly, -1% in the world ex-China in 1Q22 (in April, the dip in ex-China steel output was an even larger -5%).
❗️The most vulnerable to the deceleration in the demand from steel are iron ore producers and, in turn, integrated steelmakers. This is the reason we find iron ore producers unattractive. The continuing decline in steel production also suggests a negative outlook for nickel and copper prices, which are later stages in the consumption cycle
📉However, aluminium prices are supported by rising energy costs, despite a slowdown in the demand
#steel
📝Steel is mostly used in the early stage of construction, both for property and infrastructure. As such, steel demand dynamics can be treated as one of the leading indicators of economic growth. We now see a significant slowdown in steel demand: -9% in 1Q22 in China, due to lockdowns, and, more importantly, -1% in the world ex-China in 1Q22 (in April, the dip in ex-China steel output was an even larger -5%).
❗️The most vulnerable to the deceleration in the demand from steel are iron ore producers and, in turn, integrated steelmakers. This is the reason we find iron ore producers unattractive. The continuing decline in steel production also suggests a negative outlook for nickel and copper prices, which are later stages in the consumption cycle
📉However, aluminium prices are supported by rising energy costs, despite a slowdown in the demand
#steel
📈Australian thermal coal prices almost catch up with hard coking coal prices
⛏Over the past week, Australian FOB Newcastle (6,000 kcal/kg) increased 4% WoW to USD 410/t, stoked by strong demand. Meanwhile, HCC FOB Australia fell 8% WoW to USD 418/t (only 2% above thermal coal), driven by the falling steel production (down 5% YoY in April globally). Furthermore, Australian SSCC now trades at a USD 50/t discount compared with the Australian FOB Newcastle thermal coal export price
❗️Given that SSCC can be partly added to a thermal coal mix for power generation, we view this deviation as temporary. As such, in the short term, we would expect this to provide support for coking coal prices
#coal
⛏Over the past week, Australian FOB Newcastle (6,000 kcal/kg) increased 4% WoW to USD 410/t, stoked by strong demand. Meanwhile, HCC FOB Australia fell 8% WoW to USD 418/t (only 2% above thermal coal), driven by the falling steel production (down 5% YoY in April globally). Furthermore, Australian SSCC now trades at a USD 50/t discount compared with the Australian FOB Newcastle thermal coal export price
❗️Given that SSCC can be partly added to a thermal coal mix for power generation, we view this deviation as temporary. As such, in the short term, we would expect this to provide support for coking coal prices
#coal
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🗞Today China published preliminary import/export statistics for May
📈China’s finished steel net exports rose 71% YoY in May (vs. 41% YoY decline in April). Steel imports were down 33% YoY, while steel exports rose 47% YoY in May. The growth of China’s steel net exports might have been caused by the weak domestic steel demand amid COVID lockdowns and a relatively high steel output level (average CISA mills daily crude steel output was only 2% YoY lower in May)
📌China’s unwrought aluminium and product exports were up 54% YoY in May (vs. 37% YoY increase in April). The growth might have been driven by weak domestic demand in China amid the country’s COVID restrictions. Rising aluminium exports from China might be negative for aluminium prices. We note, however, that China’s domestic consumption might partially recover in the coming months, which could slow the growth of aluminium exports from the country
#statistics #China #steel #aluminium
📈China’s finished steel net exports rose 71% YoY in May (vs. 41% YoY decline in April). Steel imports were down 33% YoY, while steel exports rose 47% YoY in May. The growth of China’s steel net exports might have been caused by the weak domestic steel demand amid COVID lockdowns and a relatively high steel output level (average CISA mills daily crude steel output was only 2% YoY lower in May)
📌China’s unwrought aluminium and product exports were up 54% YoY in May (vs. 37% YoY increase in April). The growth might have been driven by weak domestic demand in China amid the country’s COVID restrictions. Rising aluminium exports from China might be negative for aluminium prices. We note, however, that China’s domestic consumption might partially recover in the coming months, which could slow the growth of aluminium exports from the country
#statistics #China #steel #aluminium
Morning Bites (part 1)
💍Signet has reported a 3% YoY increase in same store sales in 1Q22 (February-April). The growth rate decelerated from 24% YoY in 4Q21 (October-January). According to the company, the sales of lower-priced items were negatively affected by rising inflation, which, apparently, yielded a weaker revenue growth rate. Nevertheless, Signet reiterated its revenue guidance for 2022. As we have previously noted, growing inflation poses risks to jewellery sales and, therefore, to diamond demand.
📌South Africa’s PGM mining production contracted 23% YoY in April, while the country’s gold output fell 28% YoY. According to some market sources, the decline was caused by electricity supply constraints that were exacerbated by logistical challenges and floods. This is potentially positive for gold and PGM prices, given South Africa accounts for some 70% and 34% of platinum and palladium supply, respectively, and for 3% of global gold production
#diamonds #PGMs #gold
💍Signet has reported a 3% YoY increase in same store sales in 1Q22 (February-April). The growth rate decelerated from 24% YoY in 4Q21 (October-January). According to the company, the sales of lower-priced items were negatively affected by rising inflation, which, apparently, yielded a weaker revenue growth rate. Nevertheless, Signet reiterated its revenue guidance for 2022. As we have previously noted, growing inflation poses risks to jewellery sales and, therefore, to diamond demand.
📌South Africa’s PGM mining production contracted 23% YoY in April, while the country’s gold output fell 28% YoY. According to some market sources, the decline was caused by electricity supply constraints that were exacerbated by logistical challenges and floods. This is potentially positive for gold and PGM prices, given South Africa accounts for some 70% and 34% of platinum and palladium supply, respectively, and for 3% of global gold production
#diamonds #PGMs #gold
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Morning Bites (part 2)
📌The decline rate of China’s domestic excavator sales decelerated to 45% YoY in May from 61% YoY in April. Meanwhile, the country's total excavator sales (domestic + export) fell 24% YoY in May (vs. 47% YoY drop in April). Decreasing excavator sales indicate weak construction activity in China, which is negative for the demand for industrial metals. However, the relatively more moderate decline rate in May slightly brightens the outlook for China’s construction sector over the coming months
#China #steel #aluminium #copper
📌The decline rate of China’s domestic excavator sales decelerated to 45% YoY in May from 61% YoY in April. Meanwhile, the country's total excavator sales (domestic + export) fell 24% YoY in May (vs. 47% YoY drop in April). Decreasing excavator sales indicate weak construction activity in China, which is negative for the demand for industrial metals. However, the relatively more moderate decline rate in May slightly brightens the outlook for China’s construction sector over the coming months
#China #steel #aluminium #copper
📌China’s nickel pig iron (NPI) output was up 9% YoY in May (vs. the 16% YoY increase in April) -- both from a relatively low base. However, in the short term, the country’s NPI production might be pressured by the weak demand from stainless steel manufacturers. China’s stainless steel output was down 2% YoY in April (vs. the 1% YoY decline in March). Moreover, CRU expects the country’s stainless steel production to fall 7% YoY in June as the weak demand has led to a build-up of stainless steel inventories in China
#China #nickel
#China #nickel
Morning Bites (part 1)
🚗💨The rate of decline of China’s new internal combustion engine car sales decelerated to 26% YoY in May from 57% YoY in April. China’s falling ICE car sales are negative for the PGM demand as the country’s automotive sector accounts for some 26% and 17% of global autocatalyst Pd and Pt demand, respectively. However, in the short term, China’s car sales might be supported by the extension of car plate quotas and the announced vehicle purchase tax relief
🚙China’s new EV sales increased 105% YoY in May (vs. 45% YoY growth in April). Moreover, China’s New Energy Vehicle (NEV) sales might be further fuelled by the subsidies on NEV purchases announced in May. Growing NEV sales are supportive for the demand for battery metals: nickel, lithium and cobalt. We note that in 2021, China accounted for 49% of global EV sales (passenger cars and light-duty vehicles)
#cars #EV #nickel #lithium #cobalt
🚗💨The rate of decline of China’s new internal combustion engine car sales decelerated to 26% YoY in May from 57% YoY in April. China’s falling ICE car sales are negative for the PGM demand as the country’s automotive sector accounts for some 26% and 17% of global autocatalyst Pd and Pt demand, respectively. However, in the short term, China’s car sales might be supported by the extension of car plate quotas and the announced vehicle purchase tax relief
🚙China’s new EV sales increased 105% YoY in May (vs. 45% YoY growth in April). Moreover, China’s New Energy Vehicle (NEV) sales might be further fuelled by the subsidies on NEV purchases announced in May. Growing NEV sales are supportive for the demand for battery metals: nickel, lithium and cobalt. We note that in 2021, China accounted for 49% of global EV sales (passenger cars and light-duty vehicles)
#cars #EV #nickel #lithium #cobalt
Morning Bites (part 2)
Severstal has announced a July HRC price of RUB 48k/t (USD 833/t) excluding tax – 9% below the current producer price, which itself has declined 6% MoM. The price reduction was caused by weak domestic steel demand and rouble appreciation. We note that the stronger rouble has resulted in a domestic HRC price premium of USD 213/t. If other producers follow, the premium might narrow to USD 130/t; however, if the USD/RUB exchange rate returns to 70, the premium could drop to USD 10/t
#steel #rusteel
Severstal has announced a July HRC price of RUB 48k/t (USD 833/t) excluding tax – 9% below the current producer price, which itself has declined 6% MoM. The price reduction was caused by weak domestic steel demand and rouble appreciation. We note that the stronger rouble has resulted in a domestic HRC price premium of USD 213/t. If other producers follow, the premium might narrow to USD 130/t; however, if the USD/RUB exchange rate returns to 70, the premium could drop to USD 10/t
#steel #rusteel
🗞Today, China published its industrial production data for May
🏢China property sales continued to fall in May, declining 32% YoY (vs. -39% YoY in April). Furthermore, floor space starts dropped 42% YoY in May (vs. -44% YoY in April). Meanwhile, property completions were 31% YoY lower in May from the 14% YoY decrease in April. China’s weakened real estate sector is negative for industrial metals demand. However, a slight recovery might arrive in the short term if China eases COVID restrictions and implements its previously announced economic support measures
🏭China’s thermal power generation dropped 11% YoY in May (vs. 12% YoY decline in April). Meanwhile, total electricity generation was down 3% YoY in May (vs. 4% drop in April) due to COVID-related factory shutdowns. This is negative for China’s coal demand and prices in the short term; however, power generation could well recover in the coming months if COVID restrictions are eased
#statistics #China #steel #aluminium #copper #coal
🏢China property sales continued to fall in May, declining 32% YoY (vs. -39% YoY in April). Furthermore, floor space starts dropped 42% YoY in May (vs. -44% YoY in April). Meanwhile, property completions were 31% YoY lower in May from the 14% YoY decrease in April. China’s weakened real estate sector is negative for industrial metals demand. However, a slight recovery might arrive in the short term if China eases COVID restrictions and implements its previously announced economic support measures
🏭China’s thermal power generation dropped 11% YoY in May (vs. 12% YoY decline in April). Meanwhile, total electricity generation was down 3% YoY in May (vs. 4% drop in April) due to COVID-related factory shutdowns. This is negative for China’s coal demand and prices in the short term; however, power generation could well recover in the coming months if COVID restrictions are eased
#statistics #China #steel #aluminium #copper #coal
Morning Bites
🌊Sibanye-Stillwater’s US PGM operations were affected by a heavy flood. According to the company, the flood was triggered by snow melting and intense rains, which destroyed the road to the Stillwater mine. The company is now assessing the impact on its facilities. Possible production disruptions might slightly support PGM prices, as Sibanye-Stillwater’s US PGM operations account for some 6% and 2% of global palladium and platinum supply, respectively. However, given there is no damage to underground mine facilities, we do not expect any medium-term effect from this
$SBSW #PGMs
🌊Sibanye-Stillwater’s US PGM operations were affected by a heavy flood. According to the company, the flood was triggered by snow melting and intense rains, which destroyed the road to the Stillwater mine. The company is now assessing the impact on its facilities. Possible production disruptions might slightly support PGM prices, as Sibanye-Stillwater’s US PGM operations account for some 6% and 2% of global palladium and platinum supply, respectively. However, given there is no damage to underground mine facilities, we do not expect any medium-term effect from this
$SBSW #PGMs
Morning Bites
💎India’s rough diamond net imports increased 17% YoY in May, reversing from the 22% YoY decline in April. At the same time, India’s polished diamond net exports were up 5% YoY in May (vs. 3% YoY decline in April). The rebound of India’s rough net imports might mean a replenishment of the rough diamond supply, previously tightened by sanctions on Alrosa (30% of the global rough diamond market). Meanwhile, India’s lab-grown rough diamond net imports rose 20% YoY in May (vs. 24% YoY growth in April). The share of lab-grown net rough imports in natural diamond imports was 8% in May (as in April)
🏦China’s aggregate financing rose 45% YoY in May from the low base, outperforming market expectations by 39%. Traditional bank loans were up 26% YoY, outperforming the consensus forecast by 45%. However, according to Bloomberg, China’s credit growth was mostly driven by government bond sales and short-term consumer lending, which is unlikely to spur economic recovery
#diamonds #China #global
💎India’s rough diamond net imports increased 17% YoY in May, reversing from the 22% YoY decline in April. At the same time, India’s polished diamond net exports were up 5% YoY in May (vs. 3% YoY decline in April). The rebound of India’s rough net imports might mean a replenishment of the rough diamond supply, previously tightened by sanctions on Alrosa (30% of the global rough diamond market). Meanwhile, India’s lab-grown rough diamond net imports rose 20% YoY in May (vs. 24% YoY growth in April). The share of lab-grown net rough imports in natural diamond imports was 8% in May (as in April)
🏦China’s aggregate financing rose 45% YoY in May from the low base, outperforming market expectations by 39%. Traditional bank loans were up 26% YoY, outperforming the consensus forecast by 45%. However, according to Bloomberg, China’s credit growth was mostly driven by government bond sales and short-term consumer lending, which is unlikely to spur economic recovery
#diamonds #China #global