❓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
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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
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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
🔗Russian steelmakers’ data for May
📌According to Metal Expert, Russian steelmaker sales declined 11% YoY in May (-2% YoY in 5mo22), pressured by subdued finished product exports, which fell 41% YoY in May and 35% YoY in 5mo22. Domestic shipments were also weak in May (-8% YoY), though remained 7% up YoY in 5mo22. Semis export was the most resilient segment, remaining flat YoY in 5mo22 (+4% YoY in May), mostly due to NLMK's robust slabs export
📌Companies-wise, NLMK’s sales fell 4% YoY in May, affected by drop in finished export; Evraz had the same decline rate due to domestic finished sales decline. MMK suffered the most from the current slowdown, with total shipments decreasing 25% YoY in May. AMEZ and Mechel maintained, or even beat, 2021 sales levels. Severstal, which lost almost 80% YoY of finished steel exports in May, managed to increase domestic shipments 32% YoY, which led to 'only' a 12% YoY decline in total sales in May - roughly in line with other companies’ figures
#Russia #steels
📌According to Metal Expert, Russian steelmaker sales declined 11% YoY in May (-2% YoY in 5mo22), pressured by subdued finished product exports, which fell 41% YoY in May and 35% YoY in 5mo22. Domestic shipments were also weak in May (-8% YoY), though remained 7% up YoY in 5mo22. Semis export was the most resilient segment, remaining flat YoY in 5mo22 (+4% YoY in May), mostly due to NLMK's robust slabs export
📌Companies-wise, NLMK’s sales fell 4% YoY in May, affected by drop in finished export; Evraz had the same decline rate due to domestic finished sales decline. MMK suffered the most from the current slowdown, with total shipments decreasing 25% YoY in May. AMEZ and Mechel maintained, or even beat, 2021 sales levels. Severstal, which lost almost 80% YoY of finished steel exports in May, managed to increase domestic shipments 32% YoY, which led to 'only' a 12% YoY decline in total sales in May - roughly in line with other companies’ figures
#Russia #steels
Morning Bites
💎Petra Diamonds has reported sales of USD 93mn for Tender 6 of FY22 (ending June) vs. USD 86mn for Tender 5. At Tender 6, the company sold 569kct (vs. 636kct at Tender 5). According to Petra CEO Richard Duffy, at Tender 6 the company saw robust demand across the product mix, which yielded a 7.7% increase in LfL rough diamond prices relative to Tender 5. Previously, we also noted that De Beers raised the prices of smaller rough diamonds by 5-7% at its 5th sales cycle in June
#diamonds $PDL
💎Petra Diamonds has reported sales of USD 93mn for Tender 6 of FY22 (ending June) vs. USD 86mn for Tender 5. At Tender 6, the company sold 569kct (vs. 636kct at Tender 5). According to Petra CEO Richard Duffy, at Tender 6 the company saw robust demand across the product mix, which yielded a 7.7% increase in LfL rough diamond prices relative to Tender 5. Previously, we also noted that De Beers raised the prices of smaller rough diamonds by 5-7% at its 5th sales cycle in June
#diamonds $PDL
Morning Bites
🌏Global manufacturing PMIs showed mixed dynamics in June. The US ISM manufacturing PMI fell to 53.0, from 56.1 in May, underperforming the Bloomberg consensus estimate of 54.5. The Eurozone Markit Manufacturing PMI dropped to 52.1 (from 54.6 in May), although that was slightly above the market expectations of 52.0. Meanwhile, China's official PMI rebounded to 50.2, after the 49.6 in May (slightly below the Bloomberg survey median of 50.5). At the same time, China's Caixin manufacturing PMI rose to 51.7 (from 48.1 in May), exceeding the market forecast of 50.1. The return of China’s PMIs to the area above 50 suggests that Chinese economy has started to recover from the COVID-related lockdowns. Meanwhile, the decline in the US and EU PMIs supports our negative view on the demand for industrial metals
#PMIs
🌏Global manufacturing PMIs showed mixed dynamics in June. The US ISM manufacturing PMI fell to 53.0, from 56.1 in May, underperforming the Bloomberg consensus estimate of 54.5. The Eurozone Markit Manufacturing PMI dropped to 52.1 (from 54.6 in May), although that was slightly above the market expectations of 52.0. Meanwhile, China's official PMI rebounded to 50.2, after the 49.6 in May (slightly below the Bloomberg survey median of 50.5). At the same time, China's Caixin manufacturing PMI rose to 51.7 (from 48.1 in May), exceeding the market forecast of 50.1. The return of China’s PMIs to the area above 50 suggests that Chinese economy has started to recover from the COVID-related lockdowns. Meanwhile, the decline in the US and EU PMIs supports our negative view on the demand for industrial metals
#PMIs
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Morning Bites
🚘The growth rate of global EV sales (passenger cars and light-duty vehicles) accelerated to 49% YoY in May, from 33% YoY in April, according to Rho Motion. This was mostly driven by sales in China, which increased 105% YoY in May (vs. 45% YoY in April), as the country recovers from COVID lockdowns. However, in the US & Canada, EV sales rose only 13% YoY in May (vs. the 27% YoY growth in April). At the same time, EU & UK EV sales were up a slight 5% YoY in May, after being flat YoY in April. We note that growing global EV sales supports the demand for battery metals (nickel, lithium and cobalt)
📌Turkey’s finished steel production fell 1.4% YoY in May, reversing from the 1.6% YoY growth in April. However, domestic steel consumption recovered slightly, rising 0.7% YoY in May after the 1.2% YoY decline in April. Turkey’s steel imports dropped 22.7% YoY, while steel exports fell 23.6% YoY in May, partially due to the manufacturing slowdown in the EU
#EV #nickel #lithium #cobalt #steel
🚘The growth rate of global EV sales (passenger cars and light-duty vehicles) accelerated to 49% YoY in May, from 33% YoY in April, according to Rho Motion. This was mostly driven by sales in China, which increased 105% YoY in May (vs. 45% YoY in April), as the country recovers from COVID lockdowns. However, in the US & Canada, EV sales rose only 13% YoY in May (vs. the 27% YoY growth in April). At the same time, EU & UK EV sales were up a slight 5% YoY in May, after being flat YoY in April. We note that growing global EV sales supports the demand for battery metals (nickel, lithium and cobalt)
📌Turkey’s finished steel production fell 1.4% YoY in May, reversing from the 1.6% YoY growth in April. However, domestic steel consumption recovered slightly, rising 0.7% YoY in May after the 1.2% YoY decline in April. Turkey’s steel imports dropped 22.7% YoY, while steel exports fell 23.6% YoY in May, partially due to the manufacturing slowdown in the EU
#EV #nickel #lithium #cobalt #steel
Morning Bites (part 1)
🚘Preliminary data suggest a 17% YoY decline in new car registrations in France, the UK, Spain, Italy and Germany in June (vs. 13% YoY drop in May). In Germany and France, car sales fell 18% YoY and 14% YoY, respectively. Italy car registrations were down 15% YoY, while Spain vehicle sales decreased 8% YoY. UK vehicle sales declined 24% YoY. Since these 5 countries accounted for 70% of total new vehicle sales in Europe in 2021, this means that EU + UK car registrations continued to fall in June. If car sales continue to decline at current rates, Pd market surplus might be 10% of demand in 2022. The full results for June registrations are to be published on 15 July
📌Chile’s copper output fell 3% YoY in May (vs. 10% YoY drop in April). The decline rate might have decelerated due to improved copper demand outlook as China lifted lockdowns. Given Chile accounts for 28% of global copper supply, the country’s copper output recovery might be negative for copper prices
#cars #copper
🚘Preliminary data suggest a 17% YoY decline in new car registrations in France, the UK, Spain, Italy and Germany in June (vs. 13% YoY drop in May). In Germany and France, car sales fell 18% YoY and 14% YoY, respectively. Italy car registrations were down 15% YoY, while Spain vehicle sales decreased 8% YoY. UK vehicle sales declined 24% YoY. Since these 5 countries accounted for 70% of total new vehicle sales in Europe in 2021, this means that EU + UK car registrations continued to fall in June. If car sales continue to decline at current rates, Pd market surplus might be 10% of demand in 2022. The full results for June registrations are to be published on 15 July
📌Chile’s copper output fell 3% YoY in May (vs. 10% YoY drop in April). The decline rate might have decelerated due to improved copper demand outlook as China lifted lockdowns. Given Chile accounts for 28% of global copper supply, the country’s copper output recovery might be negative for copper prices
#cars #copper