📌 The COVID-19 lockdown in the major steelmaking city of Tangshan, China was lifted on 31 March
• Previously, some steel mills in Tangshan had idled their BFs due to shortages of raw materials caused by the lockdown
❗️This might support China's steel supply and pressure steel prices
📝Tangshan accounts for 14% of China's steel output

#steel #China #COVID_19

💎Rough diamond market robust in February 
• Rough diamond sales were strong in February, supported by continuing midstream restocking: De Beers sales grew 12% vs. the historical average level
• Further rough sales depend on the global demand for diamonds, which is, in turn, highly correlated with global macro trends
• Rapaport noted a strong decline in rough prices on secondary market in March. In our view, it means secondary market normalization after several months of abnormal prices

#diamonds

💎Midstream restocking continues
• Indian net imports of roughs in February were 57% higher than the 2019 level -- an acceleration from January's 52%.
• Meanwhile, India’s polished diamond net exports decreased 17% vs. 2019 after 18% increase in January
🤓 India accounts for c.95% of global diamond polishing

#diamonds

💎Downstream sales were strong in Jan-Feb, but might be pressured amid the COVID-19 outbreak in China and weak consumer sentiment in the US
• Downstream sales were robust in February: preliminary data suggest a 22% YoY increase in US sales, driven by the rebound in consumer spending on apparel and accessories as consumers were preparing to return to physical offices as well as strong sales for Valentine’s Day.
• China’s jewellery and watch sales rose 20% in 2mo22, in line with our bullish expectations on Lunar holiday sales.
• However, downside risks loom due to Covid-19 related restrictions in China. Moreover, US consumer sentiment worsened in March, adversely affected by rising inflation and macro uncertainty – the respective index further declined 5% MoM

#diamonds

❌LME no longer accepts Russian metals: copper, aluminium (primary and alloys) and lead.
 
📦This relates to supply to LME warehouses
🤝Russian companies supply directly to customers
📌No effect on shipments of $GMKN, $RUAL 

#copper #aluminium #lead #Russia

📌Global manufacturing PMIs declined in March
• US ISM manufacturing PMI fell to 57.1 (vs. 58.6 in February)
• Eurozone Markit Manufacturing PMI dropped to 56.5 from 58.2 in February
• The official China PMI decreased to 49.5 (vs. 50.2 in February), while China Caixin manufacturing PMI was down to 48.1 (vs. 50.4 in February)
❗️ The fact China's PMIs dropped below 50 suggests weakening manufacturing sector growth in the country. At the same time, PMIs above 50 in EU and the US might imply continuing momentum in manufacturing there.

#PMIs

📌Turkey’s finished steel production decreased 3% YoY in February, with the rate of decline decelerating from 8% YoY in January
• Meanwhile, the country’s steel consumption was up 2% YoY in February (vs. 4% YoY decline in January)
• The growth of domestic consumption, coupled with the decline in production led to a 13% YoY rise in steel imports, while steel exports increased only 1% YoY in February
❗️According to Steel Orbis, Turkey’s steel production might be negatively affected by the tight supply of steelmaking raw materials from Russia and Ukraine in the coming months

#steel #Turkey

📌 Chile’s copper output was down 7% YoY in February
• The decline might have been caused by possible supply disruptions amid protests in some of Chile’s northern mining cities in mid-February
❗️Given Chile accounts for 28% of global copper supply, this might slightly support copper prices

#copper #Chile

📌New property sales in China’s key cities fell 47% YoY in March
📝In 2mo22, China's property sales were down 10% YoY
❗️This might weaken China’s domestic demand for industrial metals

#steel #copper #aluminium

📌Aluminium prices supported by rising cash costs
• Aluminium prices increased 3% through March, driven mostly by rising costs amid the 10-40% increase of thermal coal prices. Supply concerns amid geopolitical tensions also supported price growth
• On the supply side, China's aluminium output fell 1% YoY in 2mo22. However, it might recover in the short term as China’s producers restart idled aluminium capacity amid the easing electricity crisis. At the same time, the growth of energy prices might lead to production disruptions in the EU, if smelters cannot realise sufficient margins
• China’s aluminium exports were up 23% YoY in 2mo22, which might have been caused by growing ex-China aluminium consumption (up 6-8% MoM in 2mo22). This reasoning was supported by the rise in aluminium premiums, with the US Midwest P1020 premium and the European duty paid ingot premium up 8% MoM and 26% MoM, respectively. Meanwhile, the Japan Ingot premium declined 9% MoM in March as automotive demand remained weak

#aluminium

📌 Copper underperformed other base metals in March due to weak Chinese demand and recession fears
• Copper construction demand in China remains subdued, with a weak construction pipeline, according to CRU; relief in 2022 looks unlikely
• The copper price underperformed other base metals in March, growing 'only' 2% MoM despite supply risks from Russia, due to global risk-off and recession anticipation (the copper price is usually linked with the state of the global economy, as copper is used in construction and industrial goods manufacturing). CRU also notes that despite the low level of exchange inventories, there is no shortage of cathode in the physical spot markets
• On the supply side, CRU expects new and expansion projects to add 4.3% YoY to global production in 2022. We believe that the copper price might be pressured by supply recovery and modest demand from China. However, supply short-term supply risks remain due to the continuing blockade of the Las Bambas mine (1.7% of global supply)

#copper

☢️ Medium- and long-term outlooks on uranium demand brighten as countries intend to diversify energy sources
• The uranium spot price rose 21% over the course of March to one of the historical highest levels of USD 58.6/lb, driven by energy supply concerns amid geopolitical uncertainty
• The Energy Transitions Commission Chair said that countries should keep their nuclear plants online as long as possible to help reduce dependence on fossil fuels, which have recently experienced price rises. Greater emphasis on nuclear power generation in order to reduce the usage of fossil fuels supports the demand for uranium
• At the same time, in March, the Sprott Physical Uranium Trust further increased its uranium holdings 10%, which was also supportive for the uranium price
• On the supply side, Kazatomprom announced that it does not plan to revise 2022-23 production plans, while the decision on the 2024 production level is to be announced in 3Q22

#uranium

☢️ Why Kazatomprom looks interesting
❗️Uranium is currently a fashionable commodity, as major western countries are developing strategies to accelerate their shift from fossil fuels. Kazatomprom accounts for more than 40% of the global mine supply. However, since the beginning of 2022, Kazatomprom has significantly underperformed its main competitor, Cameco: -19% YTD vs. +33% YTD.
• In the short term, there are few sources of additional uranium supply.
• Kazatom looks attractive at spot, trading at 4.0x 1-y fwd EV/EBITDA and generating 15-16% FCF and dividend yield.
• Risks: there are solid civil stockpiles of uranium in China, the EU and the US. Moreover, Sprott inventories are at 53.6mnlb, which is >30% of global annual demand. As the current price is c.20% above the weighted average purchasing price, we believe that there is a potential risk of holdings redemptions.

$KAP #uranium

⛏Nexa Resources has restored operations to full capacity at its Vazante zinc mine in Brazil
• In mid-January, production at the mine was reduced to 60% of its capacity due to flooding amid heavy rains
📝 The Vazante mine accounts for 1% of global zinc production
❗️Despite the production curtailments, the company reiterated Vazante’s zinc production guidance of 118-127kt in 2022
💰On spot prices, Nexa Resources trades at 2x 1-y fwd EV/EBITDA and generates a 30% FCF yield
• The company has exposure mostly to zinc (90% of revenue), copper (5%), and also silver, lead and gold

$NEXA #zinc

📌Global EV sales (passenger cars and light-duty vehicles) increased 93% YoY in February, with the growth rate slightly accelerating from January's 90% YoY.
• US & Canada EV sales rose 69% YoY in February, decelerating from the 91% YoY growth in January
• Meanwhile, the growth rate of China’s EV sales accelerated to 184% YoY in February from 136% YoY in January 
• At the same time, the share of BEVs in total EV sales remained at 71%
❗️Strong EV sales are to support the demand for battery metals: nickel, lithium and cobalt

#EV #nickel #lithium #cobalt

📌Volkswagen plans to build a new 'Trinity' EV plant in Germany
• The company expects the production to commence in 2026
• The plant is to have an annual production capacity of 250k BEVs per year (or 21% of EU BEV sales in 2021)
❗️This is to support the demand for battery metals -- nickel, lithium and cobalt -- in the medium term, we believe

#EV #nickel #lithium #cobalt

📌Nickel prices spiked in mid-March, mostly due to a short squeeze
• In March,nickel prices rose 31%, driven by a price spike as investors and industrial users who had sold the metal scrambled to buy back contracts after prices initially rallied on concerns about supplies. This was also supported by low inventories (-5% MoM). As such,the spread between the price and 90th %-ile cash cost widened to 74%
• Fundamentals were modest in February: stainless steel production fell 6% YoY, due to the 19% YoY decrease in China’s output. However, in March, Chinese mills are planning to significantly ramp up production to 3.0−3.1mnt (up 17% YoY). EVs consumption of nickel remains strong, with China's new EV sales were up 184% YoY in February
• Recovering demand from stainless steel coupled with low inventories and geopolitical concerns is to support the nickel price. However, we note that due to the rising energy costs, the roll-out of EVs might decelerate in the short term, which implies downside risks to demand

#nickel

📈Why IGO looks attractive
•IGO is an Australian nickel, copper, cobalt and lithium producer - a unique exposure to the whole battery metals basket
• Nickel accounts for 80% of revenues at spot (which is likely to increase to 85% after the acquisition of WSA),the largest share among the producers we know
• IGO has a share in Greenbushes -- the biggest operating lithium mine in the world. It is to add up to 100% of FY21 (ending June) attr.EBITDA by FY23. Lithium production is to generate up to 30% of attr.EBITDA in 2023
❗️As we expect a 2.5x increase in EVs by 2025 vs. 2021 to drive the demand for battery metals, we view IGO as an excellent way to gain exposure to this story. Despite the ST EV market downside risk amid high energy costs, countries are still striving to achieve their CO2 targets, which is set to make nickel and lithium high demand metals in the coming years
💰On spot prices IGO trades 5x 1-y fwd EV/EBITDA (below its historical and peer mults), and generates 13% FCF yield

$IGO #nickel #lithium

📌Palladium and platinum prices fell 9% and 6% in March, respectively, due to weak demand and easing risks to Russia's supply. We do not see an upside for the prices amid depressed automotive sector demand.
• PGM demand from autocatalysts remains weak: EU + UK car sales were down 5% YoY (-25% from the 2020 level), while the US sales declined 11% YoY. China’s ICE car registrations were up 4% YoY in January; however, we expect the growth rate to reverse amid the COVID-19 lockdown in the country. 
• Investment demand was modest in March: ETF palladium holdings remained roughly flat, while platinum ETFs sold 81koz during the period. Moreover, in mid-March, platinum Comex net speculative positioning deepened, with a 20% MoM increase in shorts and flat longs.  
• PGM supply was weak in January-February. South Africa’s PGM output was down 3% YoY in January (-19% from 2020 level). Moreover, Russia’s PGM production declined 13% YoY and 7% YoY in January and February, respectively.

#PGMs #palladium #platinum

🥇Gold prices increased 2% in March due to geopolitical uncertainty and supply risks. In the coming months, a federal funds rate hike might negatively affect gold prices, while supply concerns and geopolitics might support them.
• South Africa’s gold supply might be constrained given Sibanye-Stillwater halted production at some of its gold mines in South Africa (0.7% of global supply) due to strike action.
• Russia’s gold output (5% of global supply) might be at risk as well. The Union of Gold Producers of Russia expects Russia’s gold production to fall 10% YoY in 2022 due to disruptions in machinery deliveries, export restrictions and risks to domestic gold demand.
• At the same time, the target federal funds rate was raised to 0.25-0.50%, and further increases are possible. The Fed’s contractionary monetary policy might pose downside risks for gold prices in the short term. Nevertheless, inflation continues to accelerate, which might support gold prices.

#gold

🔗 Russian steel volumes have good prospects for redirection.

• The EU has recently imposed sanctions on Russian finished steel exports. We estimate total Russian expors to the EU were 9.2mnt in 2021, including 4.4mnt of semi-finished steel

• Russian producers need to redirect shipments from 'unfriendly countries' (mainly Eurozone) to the rest of the world. We estimate the volume in need of redirection at c.7.5mnt

• The total coverage of the 'missing' volumes is more than 6 times, on our numbers. We see the region with the best prospects for Russian steelmakers as the Asia-Pacific -- and specifically 6 countries there, the Philippines, Indonesia, Thailand, Bangladesh, Vietnam and Myanmar, which between them imported more than 30mnt in total in 2020

• Given an HRC integrated cash cost of $250-350/t vs. the current HRC FOB china $850/t, Russian steel makers have a good chance of redirecting volumes. Additional transportation costs might add c.$50/t to total costs, on our numbers

#steel #rusteel