Morning Bites (part 1)
📉CISA mills’ daily crude steel output declined 1.3% in early June from the last ten days of May. This represented a 2.0% YoY decline (vs. the 1.5% YoY increase in late May). The steel output reduction might have been caused by weak domestic demand, as suggested by the 3.4% increase in steel inventories from 31 May to 10 June (up 30.3% YoY)
🚘EU + UK passenger car registrations were down 13% YoY in May (vs. the 20% YoY drop in April). The actual rate of decline was in line with the preliminary estimate we reported earlier. As before, the decrease stemmed from the automotive parts shortage and growing inflation, which erodes consumer purchasing power. Falling car sales are negative for PGM demand
#China #steel #cars
📉CISA mills’ daily crude steel output declined 1.3% in early June from the last ten days of May. This represented a 2.0% YoY decline (vs. the 1.5% YoY increase in late May). The steel output reduction might have been caused by weak domestic demand, as suggested by the 3.4% increase in steel inventories from 31 May to 10 June (up 30.3% YoY)
🚘EU + UK passenger car registrations were down 13% YoY in May (vs. the 20% YoY drop in April). The actual rate of decline was in line with the preliminary estimate we reported earlier. As before, the decrease stemmed from the automotive parts shortage and growing inflation, which erodes consumer purchasing power. Falling car sales are negative for PGM demand
#China #steel #cars
Morning Bites (part 2)
💍According to MasterCard SpendingPulse, preliminary US jewellery sales increased 22% YoY in May (vs. the 18% YoY growth in April). According to MasterCard, jewellery sales were supported by weddings and other social events postponed from the pandemic period. We note, however, that the MasterCard data must be treated carefully given that in April it showed a 33% YoY growth, while the US Department of Commerce reported a much more modest increase of 18% YoY. We also note that the current economic situation in the US is not conducive to jewellery sales growth
#diamonds
💍According to MasterCard SpendingPulse, preliminary US jewellery sales increased 22% YoY in May (vs. the 18% YoY growth in April). According to MasterCard, jewellery sales were supported by weddings and other social events postponed from the pandemic period. We note, however, that the MasterCard data must be treated carefully given that in April it showed a 33% YoY growth, while the US Department of Commerce reported a much more modest increase of 18% YoY. We also note that the current economic situation in the US is not conducive to jewellery sales growth
#diamonds
Morning Bites
• Australia has invoked emergency powers to block coal exports, according to Reuters. The country’s authorities have given themselves the power to block coal exports if it is needed to mitigate the power crisis. Moreover, the government of New South Wales invoked emergency powers last week to oblige miners to redirect export coal to local power generators. Given Australia accounts for 21% of global thermal coal exports, this might further support the already elevated thermal coal prices (thermal coal FOB Newcastle +114% YTD)
• Russia’s Ministry of Energy sees the country’s coal production falling 17% YoY in 2022 in the worst case scenario. The Ministry also sees that exports might decline 30% YoY in 2022 in the worst case scenario. We note that the transportation of coal in export directions fell 8% YoY in 5mo22, while coal production was roughly flat YoY in 4mo22
#coal
• Australia has invoked emergency powers to block coal exports, according to Reuters. The country’s authorities have given themselves the power to block coal exports if it is needed to mitigate the power crisis. Moreover, the government of New South Wales invoked emergency powers last week to oblige miners to redirect export coal to local power generators. Given Australia accounts for 21% of global thermal coal exports, this might further support the already elevated thermal coal prices (thermal coal FOB Newcastle +114% YTD)
• Russia’s Ministry of Energy sees the country’s coal production falling 17% YoY in 2022 in the worst case scenario. The Ministry also sees that exports might decline 30% YoY in 2022 in the worst case scenario. We note that the transportation of coal in export directions fell 8% YoY in 5mo22, while coal production was roughly flat YoY in 4mo22
#coal
⛏Are Russian coal producers competitive enough?
📈The cash cost of Russian thermal coal producers rose to USD 63/t amid rouble appreciation and rising raw material prices, now exceeding the country’s major rivals on the seaborne market. Though in the mid-cycle the current exchange rate might make them loss-making, producers remain profitable as prices remain elevated amid a continuing energy shortage
📉The cash costs of coking coal producers reached USD 139/t, exceeding the seaborne export costs of other producing countries. And while the coking coal price has significant support from thermal coal consumers, we see downside risks to coking coal prices in the short term amid declining steel production worldwide (-5% YoY in April)
❗️However, the coal industry was underinvested in recent years, resulting in capacity expansion requiring more time and investments, which, in turn, supports prices
#coal
📈The cash cost of Russian thermal coal producers rose to USD 63/t amid rouble appreciation and rising raw material prices, now exceeding the country’s major rivals on the seaborne market. Though in the mid-cycle the current exchange rate might make them loss-making, producers remain profitable as prices remain elevated amid a continuing energy shortage
📉The cash costs of coking coal producers reached USD 139/t, exceeding the seaborne export costs of other producing countries. And while the coking coal price has significant support from thermal coal consumers, we see downside risks to coking coal prices in the short term amid declining steel production worldwide (-5% YoY in April)
❗️However, the coal industry was underinvested in recent years, resulting in capacity expansion requiring more time and investments, which, in turn, supports prices
#coal
❓Is rouble appreciation a problem for steelmakers in Russia?
📝The cash cost of steel production has reached USD 361/t, and USD 704/t for integrated and non-integrated steel producers. This is still 15-30% lower than the cash costs of global producers. Thus, despite the need of Russian steelmakers to provide discounts in order to redirect exports, producers remain competitive on the global market
📉However, given HRC FOB Black Sea has declined 8% YTD, Russia’s non-integrated steel exporters are close to breakeven. This means that only integrated producers now have a positive export margin.
📈Meanwhile, domestic prices exceed the cash cost of non-integrated steel producers by more than 25% now. However, we note downside risks to prices on the back of the weak domestic steel demand and rouble appreciation
#steel
📝The cash cost of steel production has reached USD 361/t, and USD 704/t for integrated and non-integrated steel producers. This is still 15-30% lower than the cash costs of global producers. Thus, despite the need of Russian steelmakers to provide discounts in order to redirect exports, producers remain competitive on the global market
📉However, given HRC FOB Black Sea has declined 8% YTD, Russia’s non-integrated steel exporters are close to breakeven. This means that only integrated producers now have a positive export margin.
📈Meanwhile, domestic prices exceed the cash cost of non-integrated steel producers by more than 25% now. However, we note downside risks to prices on the back of the weak domestic steel demand and rouble appreciation
#steel
❓And what about the cash cost of aluminium producers?
📈The main cash cost driver for aluminium production is the cost of energy. Given the major Russian aluminium producing company, Rusal, consumes hydro energy at fixed contract prices, it is more competitive than coal-based producers. Rusal’s cash cost of USD 2,387/t is more than 40% lower than the cash cost of companies operating using thermal coal power generation. Moreover, En+’s fully-integrated cash cost is lower, at USD 2,095/t
📉However, on the back of rouble appreciation, Rusal’s cash cost exceeds by more than 25% cash cost of global producers, which operate using their own sources of renewable energy or at fixed prices. Meanwhile, Rusal remains profitable despite the falling aluminium price (down 11% YTD)
📈The main cash cost driver for aluminium production is the cost of energy. Given the major Russian aluminium producing company, Rusal, consumes hydro energy at fixed contract prices, it is more competitive than coal-based producers. Rusal’s cash cost of USD 2,387/t is more than 40% lower than the cash cost of companies operating using thermal coal power generation. Moreover, En+’s fully-integrated cash cost is lower, at USD 2,095/t
📉However, on the back of rouble appreciation, Rusal’s cash cost exceeds by more than 25% cash cost of global producers, which operate using their own sources of renewable energy or at fixed prices. Meanwhile, Rusal remains profitable despite the falling aluminium price (down 11% YTD)
Morning Bites
Chile's Codelco has decided to stop its Ventanas copper smelter after an environmental incident. Previously, the company halted its Ventanas smelter and refinery to carry out maintenance after the authorities declared an environmental emergency in the region. Moreover, Codelco unions announced that they are ready to strike after the smelter shuttered. The Las Ventanas smelter accounts for some 0.5% of global primary copper supply. However, some sources have stated that the operations of the associated copper refinery are to remain unaffected (1.6% of refined supply). Given the copper refinery will continue to operate, we do not expect a significant impact on global supply or copper prices
#copper
Chile's Codelco has decided to stop its Ventanas copper smelter after an environmental incident. Previously, the company halted its Ventanas smelter and refinery to carry out maintenance after the authorities declared an environmental emergency in the region. Moreover, Codelco unions announced that they are ready to strike after the smelter shuttered. The Las Ventanas smelter accounts for some 0.5% of global primary copper supply. However, some sources have stated that the operations of the associated copper refinery are to remain unaffected (1.6% of refined supply). Given the copper refinery will continue to operate, we do not expect a significant impact on global supply or copper prices
#copper
👍1
Morning Bites
• Steelmaking raw material prices have continued their slide this week, with iron ore already down 23% since the beginning of June, to USD 110/t. This broadly matched our negative near-term outlook. Coking coal has also corrected by 24% on the back of demand reduction
❗️Overall, this has resulted in a recovery in seaborne steelmaking margins, as, on our numbers, Chinese HRC exporters were burning cash in May at rate of USD 154/t (vs. USD 42/t now). Given margins are still negative, we think pressure on iron ore and coking coal prices will continue in the next several weeks, though coking coal might get support from the demand for energy
#iron_ore #coal #steel
• Steelmaking raw material prices have continued their slide this week, with iron ore already down 23% since the beginning of June, to USD 110/t. This broadly matched our negative near-term outlook. Coking coal has also corrected by 24% on the back of demand reduction
❗️Overall, this has resulted in a recovery in seaborne steelmaking margins, as, on our numbers, Chinese HRC exporters were burning cash in May at rate of USD 154/t (vs. USD 42/t now). Given margins are still negative, we think pressure on iron ore and coking coal prices will continue in the next several weeks, though coking coal might get support from the demand for energy
#iron_ore #coal #steel
Morning Bites
• De Beers has reported sales of USD 650mn at its 5th cycle in 2022, 10% above the historical average and a 36% increase over the same period a year earlier. According to Bruce Cleaver, the CEO of De Beers, diamond jewellery demand continues to perform well in the key US market. This, coupled with the gradual reopening of retail outlets in China following COVID-19-related lockdowns have supported De Beers’ sales momentum
• Global crude steel output in May contracted 3.5% YoY to 170mnt, a slight improvement from the 5.1% YoY decline in April. China and ex-China steel production fell 3.5% YoY in May, with the share of China’s steel output in the total at 57%. In May, EU crude steel output dropped 4% YoY, while US steel production declined 2% YoY. At the same time, India’s steel production rose 17% YoY in May (vs. +6% YoY in April)
#diamonds #steel
• De Beers has reported sales of USD 650mn at its 5th cycle in 2022, 10% above the historical average and a 36% increase over the same period a year earlier. According to Bruce Cleaver, the CEO of De Beers, diamond jewellery demand continues to perform well in the key US market. This, coupled with the gradual reopening of retail outlets in China following COVID-19-related lockdowns have supported De Beers’ sales momentum
• Global crude steel output in May contracted 3.5% YoY to 170mnt, a slight improvement from the 5.1% YoY decline in April. China and ex-China steel production fell 3.5% YoY in May, with the share of China’s steel output in the total at 57%. In May, EU crude steel output dropped 4% YoY, while US steel production declined 2% YoY. At the same time, India’s steel production rose 17% YoY in May (vs. +6% YoY in April)
#diamonds #steel
Morning Bites
• China’s coking coal imports rose 34% YoY in May, with the growth rate accelerating from 22% YoY in April. This was mostly caused by the recovery of Mongolia’s coal supply and strengthening demand from steel makers, according to Metal Expert. However, we note downside risks for China’s coking coal imports amid the potential decrease in steel production
• China’s ROM iron ore output increased 6% YoY in May from the 1% YoY decline in April. This was mostly caused by demand recovery and the ongoing efforts to increase self-sufficiency in raw materials, according to Metal Expert. However, China’s plan to keep 2022 steel output below the 2021 level might force steel producers to reduce their output run-rate in the coming months, which is negative for the demand for iron ore
#coal #iron_ore
• China’s coking coal imports rose 34% YoY in May, with the growth rate accelerating from 22% YoY in April. This was mostly caused by the recovery of Mongolia’s coal supply and strengthening demand from steel makers, according to Metal Expert. However, we note downside risks for China’s coking coal imports amid the potential decrease in steel production
• China’s ROM iron ore output increased 6% YoY in May from the 1% YoY decline in April. This was mostly caused by demand recovery and the ongoing efforts to increase self-sufficiency in raw materials, according to Metal Expert. However, China’s plan to keep 2022 steel output below the 2021 level might force steel producers to reduce their output run-rate in the coming months, which is negative for the demand for iron ore
#coal #iron_ore
Morning Bites
📉CISA mills’ daily crude steel output declined 1.34% in the middle ten days of June from the first ten days of the month. This might have been partially caused by the weakening demand for steel as steel inventories rose 10.65% during the period (up 30.75% YoY). Moreover, China’s intention to keep 2022 crude steel output below the 2021 level continues to pressure production. We see a further downside to China’s crude steel output as steel manufacturers still need to lower their output by 9%+ to achieve the targeted steel output reduction
#steel
📉CISA mills’ daily crude steel output declined 1.34% in the middle ten days of June from the first ten days of the month. This might have been partially caused by the weakening demand for steel as steel inventories rose 10.65% during the period (up 30.75% YoY). Moreover, China’s intention to keep 2022 crude steel output below the 2021 level continues to pressure production. We see a further downside to China’s crude steel output as steel manufacturers still need to lower their output by 9%+ to achieve the targeted steel output reduction
#steel
👍2
Morning Bites
💍China’s jewellery and watch retail sales fell 16% YoY in May, with the rate of decline decelerating from 27% YoY in April. The drop was mainly caused by COVID-related lockdowns in the country. However, given the decreasing number of new COVID cases and easing of restrictions, a partial recovery of China’s jewellery sales is possible in the coming months, which might be positive for the diamond demand
#China #diamonds
💍China’s jewellery and watch retail sales fell 16% YoY in May, with the rate of decline decelerating from 27% YoY in April. The drop was mainly caused by COVID-related lockdowns in the country. However, given the decreasing number of new COVID cases and easing of restrictions, a partial recovery of China’s jewellery sales is possible in the coming months, which might be positive for the diamond demand
#China #diamonds
Morning Bites
☢️Half of France’s 56 nuclear reactors are currently shut down, according to Bloomberg. The 28 stopped reactors might account for some 26% of the EU uranium requirement (or 7% of the global). While the majority of them were halted for regular maintenance and refuelling (which might take around 3 weeks), the remaining 12 (11% of the EU uranium demand, or 3% of the global) were stopped due to corrosion issues that could take several years to fix. Therefore, this might negatively affect uranium demand in the medium term. We also note that the halted reactors account for some 35% of France’s overall electricity generation. Since the country could use thermal power to offset the lost nuclear capacity, this might also support the coal demand
#uranium
☢️Half of France’s 56 nuclear reactors are currently shut down, according to Bloomberg. The 28 stopped reactors might account for some 26% of the EU uranium requirement (or 7% of the global). While the majority of them were halted for regular maintenance and refuelling (which might take around 3 weeks), the remaining 12 (11% of the EU uranium demand, or 3% of the global) were stopped due to corrosion issues that could take several years to fix. Therefore, this might negatively affect uranium demand in the medium term. We also note that the halted reactors account for some 35% of France’s overall electricity generation. Since the country could use thermal power to offset the lost nuclear capacity, this might also support the coal demand
#uranium
Morning Bites
📌Antofagasta and China’s copper smelters have agreed a 1H23 TC/RCs price level of USD 76/t. This is 11% below the spot TC/RCs of USD 85.5/t and 17% above the 2022 contract price of USD 65/t. The decrease in the TC/RCs level relative to the spot price might indicate that market participants anticipate copper concentrate supply to tighten. As we have previously noted, in April, Chile’s and Peru’s copper output fell 10% YoY and 2% YoY, respectively. Chile and Peru account for 26% and 11% of the global mine copper supply, respectively
🥇Russian gold output declined 9% YoY in May (vs. the 20% YoY drop in April). In 5mo22, the country’s gold production fell 5% YoY. As we noted previously, the Union of Gold Producers of Russia has forecasted a 10% YoY decline in Russian gold output in 2022. Given Russia accounts for some 10% of global gold mine production, this might support gold prices
#copper #gold
📌Antofagasta and China’s copper smelters have agreed a 1H23 TC/RCs price level of USD 76/t. This is 11% below the spot TC/RCs of USD 85.5/t and 17% above the 2022 contract price of USD 65/t. The decrease in the TC/RCs level relative to the spot price might indicate that market participants anticipate copper concentrate supply to tighten. As we have previously noted, in April, Chile’s and Peru’s copper output fell 10% YoY and 2% YoY, respectively. Chile and Peru account for 26% and 11% of the global mine copper supply, respectively
🥇Russian gold output declined 9% YoY in May (vs. the 20% YoY drop in April). In 5mo22, the country’s gold production fell 5% YoY. As we noted previously, the Union of Gold Producers of Russia has forecasted a 10% YoY decline in Russian gold output in 2022. Given Russia accounts for some 10% of global gold mine production, this might support gold prices
#copper #gold