China’s import/export statistics for June - highlights
• China’s unwrought copper imports were up 26% YoY in June (vs. 4% YoY increase in May). The growth might have been driven by the partial recovery of manufacturing activity in China following the lifting of COVID lockdowns
• China’s unwrought aluminium and product exports rose 34% YoY in June (vs. 54% YoY growth in May). According to industry reports, the growth rate deceleration might have been caused by subdued aluminium demand outside China and the resumption of anti-dumping tariffs in the EU. These factors might further slow-down China’s aluminium exports in the short term
• The growth rate of China’s finished steel net exports decelerated to 30% YoY in June from 71% YoY in May. However, we note that China’s steel demand apparently remains relatively weak, which was reflected by the 7% decrease in the daily crude steel output through the last ten days of June
#China #copper #aluminium #steel
• China’s unwrought copper imports were up 26% YoY in June (vs. 4% YoY increase in May). The growth might have been driven by the partial recovery of manufacturing activity in China following the lifting of COVID lockdowns
• China’s unwrought aluminium and product exports rose 34% YoY in June (vs. 54% YoY growth in May). According to industry reports, the growth rate deceleration might have been caused by subdued aluminium demand outside China and the resumption of anti-dumping tariffs in the EU. These factors might further slow-down China’s aluminium exports in the short term
• The growth rate of China’s finished steel net exports decelerated to 30% YoY in June from 71% YoY in May. However, we note that China’s steel demand apparently remains relatively weak, which was reflected by the 7% decrease in the daily crude steel output through the last ten days of June
#China #copper #aluminium #steel
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Iron ore – the outlook remains negative
• The prospects for the iron ore market remain poor, due to the collapse in demand caused by the slowdown in global manufacturing and construction, as well as COVID-related risks in China and Europe. As a result, global steel output fell 3.5% YoY May (6.3% YoY in 5mo22) and is likely to remain subdued until YE22, we think. Another important factor that could keep steel production weak is China’s plan to reduce steel output in 2022. As such, China is likely to keep the reduced late-June output run-rates in order to achieve the regulator’s targets
• On the supply side, the iron ore exports of the two major players, Australia and Brazil, were roughly flat YoY in 4mo22. Moreover, industry reports suggest an increase in iron ore supply in the coming months
• As a result of sluggish iron ore demand, prices have fallen 6% since mid-May. As prices might only find costs support at the ~USD 70/t level, there is a room for a further correction in the coming months
#iron_ore
• The prospects for the iron ore market remain poor, due to the collapse in demand caused by the slowdown in global manufacturing and construction, as well as COVID-related risks in China and Europe. As a result, global steel output fell 3.5% YoY May (6.3% YoY in 5mo22) and is likely to remain subdued until YE22, we think. Another important factor that could keep steel production weak is China’s plan to reduce steel output in 2022. As such, China is likely to keep the reduced late-June output run-rates in order to achieve the regulator’s targets
• On the supply side, the iron ore exports of the two major players, Australia and Brazil, were roughly flat YoY in 4mo22. Moreover, industry reports suggest an increase in iron ore supply in the coming months
• As a result of sluggish iron ore demand, prices have fallen 6% since mid-May. As prices might only find costs support at the ~USD 70/t level, there is a room for a further correction in the coming months
#iron_ore
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Valuation update of key iron ore producers
💰Three of the four largest iron ore producers look too expensive, with RIO being the most heavily mispriced: the company trades at 5.2x 1-y fwd EV/EBITDA on spot, which exceeds the multiples of its peers. BHP and VALE trade at 2.9-3.2x 1-y fwd EV/EBITDA on spot, offering a 14-17% FCF yield and a 12-15% dividend and buyback yield
📉Given the negative outlook on iron ore prices, these iron ore companies look even more expensive
💰If iron ore price to fall to USD 70/t, the aforementioned companies would be trading at 4.2-8.5x 1-y fwd EV/EBITDA, a 3-11% FCF yield and a 6-10% dividend and buyback yield
💰Out of the four major iron ore producers, only FMG looks, perhaps, fairly valued, with 2.7x EV/EBITDA, a 21% FCF yield and a 16% dividend and buyback yield
#iron_ore
💰Three of the four largest iron ore producers look too expensive, with RIO being the most heavily mispriced: the company trades at 5.2x 1-y fwd EV/EBITDA on spot, which exceeds the multiples of its peers. BHP and VALE trade at 2.9-3.2x 1-y fwd EV/EBITDA on spot, offering a 14-17% FCF yield and a 12-15% dividend and buyback yield
📉Given the negative outlook on iron ore prices, these iron ore companies look even more expensive
💰If iron ore price to fall to USD 70/t, the aforementioned companies would be trading at 4.2-8.5x 1-y fwd EV/EBITDA, a 3-11% FCF yield and a 6-10% dividend and buyback yield
💰Out of the four major iron ore producers, only FMG looks, perhaps, fairly valued, with 2.7x EV/EBITDA, a 21% FCF yield and a 16% dividend and buyback yield
#iron_ore
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Morning Bites
📌South Africa’s PGM mining production was up 3% YoY in May, recovering from the 23% YoY decline in April. Meanwhile, the country’s gold output fell 28% YoY in May, which was equal to April’s rate of decline. The recovery of PGM production might have been partially caused by the restart of a furnace at Impala Platinum’s Rustenburg production facility (originally scheduled for May). According to Bloomberg, South Africa’s mining sector is currently being affected by frequent power cuts, which might put further pressure on the county’s mining production. We note that South Africa accounts for some 70% and 34% of platinum and palladium supply, respectively, and for 3% of global gold production
#PGMs #gold
📌South Africa’s PGM mining production was up 3% YoY in May, recovering from the 23% YoY decline in April. Meanwhile, the country’s gold output fell 28% YoY in May, which was equal to April’s rate of decline. The recovery of PGM production might have been partially caused by the restart of a furnace at Impala Platinum’s Rustenburg production facility (originally scheduled for May). According to Bloomberg, South Africa’s mining sector is currently being affected by frequent power cuts, which might put further pressure on the county’s mining production. We note that South Africa accounts for some 70% and 34% of platinum and palladium supply, respectively, and for 3% of global gold production
#PGMs #gold
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🗞Today, China has published its industrial production data for June (see the table above)
#statistics #China
#statistics #China
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China’s industrial production data for June - highlights (part 1)
📌China’s crude steel output fell 3.3% YoY in June (vs. -3.5% YoY in May). The decline was mainly caused by the subdued steel demand on the back of weak manufacturing activity and a slowdown in the construction sector. China’s apparent steel consumption dropped 5% YoY in June (vs. -7% YoY in May)
🏢China property sales fell 18% YoY in June (vs. -32% YoY in May). Moreover, floor space starts decreased 45% YoY in June (vs. -42% YoY in May). At the same time, the decline rate of property completions accelerated to 41% YoY in June from 31% YoY in May. China’s personal mortgage loans continued to fall as well, with a 20% YoY decline in June (vs. -34% YoY in May). The ongoing weakening of China’s real estate sector is negative for industrial metals demand. However, China’s economic stimulus measures might improve the situation to some extent
#China #steel #aluminium #copper
📌China’s crude steel output fell 3.3% YoY in June (vs. -3.5% YoY in May). The decline was mainly caused by the subdued steel demand on the back of weak manufacturing activity and a slowdown in the construction sector. China’s apparent steel consumption dropped 5% YoY in June (vs. -7% YoY in May)
🏢China property sales fell 18% YoY in June (vs. -32% YoY in May). Moreover, floor space starts decreased 45% YoY in June (vs. -42% YoY in May). At the same time, the decline rate of property completions accelerated to 41% YoY in June from 31% YoY in May. China’s personal mortgage loans continued to fall as well, with a 20% YoY decline in June (vs. -34% YoY in May). The ongoing weakening of China’s real estate sector is negative for industrial metals demand. However, China’s economic stimulus measures might improve the situation to some extent
#China #steel #aluminium #copper
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China’s industrial production data for June - highlights (part 2)
🪨China’s coal production rose 15% YoY in June after a 10% YoY increase in May. The growth might have been caused by China’s intention to ensure sufficient domestic coal supplies. Some Chinese coal mining provinces target a 10% YoY increase in coal production in 2022. However, according to industry sources, China’s miners are now switching to lower quality coal, as the domestic price cap is almost 4x lower than the spot price (with no quality adjustment). According to Reuters, some utilities in China are now consuming 15% YoY more thermal coal due to its lower quality
#China #coal
🪨China’s coal production rose 15% YoY in June after a 10% YoY increase in May. The growth might have been caused by China’s intention to ensure sufficient domestic coal supplies. Some Chinese coal mining provinces target a 10% YoY increase in coal production in 2022. However, according to industry sources, China’s miners are now switching to lower quality coal, as the domestic price cap is almost 4x lower than the spot price (with no quality adjustment). According to Reuters, some utilities in China are now consuming 15% YoY more thermal coal due to its lower quality
#China #coal
Morning Bites
💎India’s rough diamond net imports rose 4% YoY in June (vs. +17% YoY in May). Meanwhile, India’s polished diamond net exports were down 1% YoY in June (vs. +5% YoY in May). The weaker growth in rough net imports and the slight decline in polished net exports might signal softer demand for polished diamonds. Previously, we have noted that surging inflation and recession concerns pose risks to the downstream demand for diamonds. Meanwhile, India’s lab-grown rough diamond net imports rose 45% YoY in June (vs. +20% YoY in May). The share of lab-grown net rough imports in natural diamond imports remained at 8% in June (the same as in May)
🚘EU + UK passenger car registrations fell 17% YoY in June (vs. -13% YoY in May). This was also 29% below the peak 2019 level. The actual dynamics were in line with the preliminary estimate we reported earlier. The decline in car sales has been caused by the shortage of parts and by rising inflation. Falling car sales are negative for PGM demand
#diamonds #cars
💎India’s rough diamond net imports rose 4% YoY in June (vs. +17% YoY in May). Meanwhile, India’s polished diamond net exports were down 1% YoY in June (vs. +5% YoY in May). The weaker growth in rough net imports and the slight decline in polished net exports might signal softer demand for polished diamonds. Previously, we have noted that surging inflation and recession concerns pose risks to the downstream demand for diamonds. Meanwhile, India’s lab-grown rough diamond net imports rose 45% YoY in June (vs. +20% YoY in May). The share of lab-grown net rough imports in natural diamond imports remained at 8% in June (the same as in May)
🚘EU + UK passenger car registrations fell 17% YoY in June (vs. -13% YoY in May). This was also 29% below the peak 2019 level. The actual dynamics were in line with the preliminary estimate we reported earlier. The decline in car sales has been caused by the shortage of parts and by rising inflation. Falling car sales are negative for PGM demand
#diamonds #cars
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Morning Bites (part 1)
📉China’s domestic excavator sales fell 35% YoY in June (after the 45% YoY decline in May), while total excavator sales (domestic + export) were down 10% YoY in June (vs. a 24% YoY drop in May). Although the rate of decline has been decelerating gradually over the last three months, falling excavator sales indicate that construction activity might remain weak, which is negative for the demand for industrial metals
🏦China’s aggregate financing rose 41% YoY in June, outperforming market expectations by 23%. Traditional bank loans were up 33% YoY, exceeding the consensus forecast by 17%. According to Bloomberg, China’s credit growth was driven by the implementation of government support measures, the easing of COVID restrictions and significant government bond sales. We note that the increase in aggregate financing might potentially support China’s property sector and, hence, the demand for industrial metals in the coming months
#China #global #steel #aluminium #copper
📉China’s domestic excavator sales fell 35% YoY in June (after the 45% YoY decline in May), while total excavator sales (domestic + export) were down 10% YoY in June (vs. a 24% YoY drop in May). Although the rate of decline has been decelerating gradually over the last three months, falling excavator sales indicate that construction activity might remain weak, which is negative for the demand for industrial metals
🏦China’s aggregate financing rose 41% YoY in June, outperforming market expectations by 23%. Traditional bank loans were up 33% YoY, exceeding the consensus forecast by 17%. According to Bloomberg, China’s credit growth was driven by the implementation of government support measures, the easing of COVID restrictions and significant government bond sales. We note that the increase in aggregate financing might potentially support China’s property sector and, hence, the demand for industrial metals in the coming months
#China #global #steel #aluminium #copper
Morning Bites (part 2)
☢️Uzbekistan’s annual uranium output might reach 7,100tU/a by 2030, doubling from the roughly 3,500tU/a it currently produces, according to a recently released resolution of the President of Uzbekistan. This implies an 8% 2021-30 CAGR. Given that the planned increase in annual production accounts for some 7% of global uranium supply, this might negatively affect uranium prices in the long run
#uranium
☢️Uzbekistan’s annual uranium output might reach 7,100tU/a by 2030, doubling from the roughly 3,500tU/a it currently produces, according to a recently released resolution of the President of Uzbekistan. This implies an 8% 2021-30 CAGR. Given that the planned increase in annual production accounts for some 7% of global uranium supply, this might negatively affect uranium prices in the long run
#uranium
Morning Bites (part 1)
💍According to China’s jewellery retailers, there was an 18-19% YoY decline in LFL (same store) sales of gem-set jewellery in 2Q22. Chow Tai Fook reported an 18% YoY drop in LFL sales of gem-set, platinum and K-gold jewellery in 2Q22. Sales in Mainland China fell 17%, while HK and Macau sales decreased 18% YoY. Meanwhile, Luk Fook reported a 19% YoY decline in gem-set jewellery sales in 2Q22. In Mainland China, gem-set jewellery sales were down 34% YoY, while in HK and Macau they decreased 21% YoY. The decline was mostly caused by COVID-19 restrictions. Weakening jewellery sales are negative for the demand for diamonds. However, China’s jewellery sales might recover somewhat in 3Q22 if the country does not reimpose restrictions in response to the rising number of COVID cases
#diamonds
💍According to China’s jewellery retailers, there was an 18-19% YoY decline in LFL (same store) sales of gem-set jewellery in 2Q22. Chow Tai Fook reported an 18% YoY drop in LFL sales of gem-set, platinum and K-gold jewellery in 2Q22. Sales in Mainland China fell 17%, while HK and Macau sales decreased 18% YoY. Meanwhile, Luk Fook reported a 19% YoY decline in gem-set jewellery sales in 2Q22. In Mainland China, gem-set jewellery sales were down 34% YoY, while in HK and Macau they decreased 21% YoY. The decline was mostly caused by COVID-19 restrictions. Weakening jewellery sales are negative for the demand for diamonds. However, China’s jewellery sales might recover somewhat in 3Q22 if the country does not reimpose restrictions in response to the rising number of COVID cases
#diamonds
Morning Bites (part 2)
💎Petra Diamonds reported a 46% YoY increase in revenues in 2Q22, which was mostly driven by the 42% YoY growth of the average realised price. Previously, Petra reported a 7.7% increase in LfL rough diamond prices at Tender 6 relative to Tender 5. Even though the company said that the diamond market remained strong, it also noted that rising inflation might be a potential dampener on diamond demand. In addition, Petra reported a 6% YoY decrease in diamond production in 2Q22, mostly on the back of lower tonnes treated at Cullinan Mine. Nevertheless, the company reiterated its production and cost guidance through FY2025 (ending June)
#diamonds $PDL
💎Petra Diamonds reported a 46% YoY increase in revenues in 2Q22, which was mostly driven by the 42% YoY growth of the average realised price. Previously, Petra reported a 7.7% increase in LfL rough diamond prices at Tender 6 relative to Tender 5. Even though the company said that the diamond market remained strong, it also noted that rising inflation might be a potential dampener on diamond demand. In addition, Petra reported a 6% YoY decrease in diamond production in 2Q22, mostly on the back of lower tonnes treated at Cullinan Mine. Nevertheless, the company reiterated its production and cost guidance through FY2025 (ending June)
#diamonds $PDL
Morning Bites (part 3)
☢️Paladin Energy has confirmed its plan to restart Namibia’s Langer Heinrich uranium mine in 1Q24. The company had previously released a restart plan, but did not specify the date. According to the plan, production at Langer Heinrich might reach 2,300tU (5% of global uranium supply) after full ramp-up, which might take 15 months. Since the restart plan was available before, this news is neutral for our market balance forecast
#uranium
☢️Paladin Energy has confirmed its plan to restart Namibia’s Langer Heinrich uranium mine in 1Q24. The company had previously released a restart plan, but did not specify the date. According to the plan, production at Langer Heinrich might reach 2,300tU (5% of global uranium supply) after full ramp-up, which might take 15 months. Since the restart plan was available before, this news is neutral for our market balance forecast
#uranium
🔗Ashinsky Metallurgical Plant – strong 1H22 RAS numbers are out
📌Ashinsky’s (AMEZ RM) RAS revenue expanded 20% YoY in 1H22. The company has released neither operating data nor any other comments so far, but we believe that the increase was mainly driven by a realised price increase, which, in turn, benefited from the expansion of the premium over the benchmark
📌1H22, net profit surged more than 120% YoY, driven up by ~45% higher operating profit as well as strong ‘other income’
💰At spot the company trades at an attractive level of 0.7x 1-y fwd EV/EBITDA (vs. 3.4x for Russian steelmakers’ median) with a lucrative >45% FCF yield. Moreover, the company is net cash positive (c. 35% of mcap by YE22), which is to expand further, almost reaching 70% of the company’s mcap by YE24, in our estimates
#steel
📌Ashinsky’s (AMEZ RM) RAS revenue expanded 20% YoY in 1H22. The company has released neither operating data nor any other comments so far, but we believe that the increase was mainly driven by a realised price increase, which, in turn, benefited from the expansion of the premium over the benchmark
📌1H22, net profit surged more than 120% YoY, driven up by ~45% higher operating profit as well as strong ‘other income’
💰At spot the company trades at an attractive level of 0.7x 1-y fwd EV/EBITDA (vs. 3.4x for Russian steelmakers’ median) with a lucrative >45% FCF yield. Moreover, the company is net cash positive (c. 35% of mcap by YE22), which is to expand further, almost reaching 70% of the company’s mcap by YE24, in our estimates
#steel
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Morning Bites (part 1)
🚗💨Internal combustion engine (ICE) car registrations in the EU fell 25% YoY in 2Q22 (after the 26% YoY decline in 1Q22). Petrol car sales were down 23% YoY in 2Q22 (vs. -21% YoY in 1Q22), while diesel car registrations slid 29% YoY in 2Q22 (decelerating from the 35% YoY drop in 1Q22). Diesel cars constituted 29% of ICE car sales in 2Q22, as they did in 1Q22 and 4Q21. Weak ICE car sales are unfavourable for PGM demand
🚘EU and UK EV sales fell 2% YoY in 2Q22 (vs. +24% YoY in 1Q22), the first negative dynamics since 4Q16. The decline was mostly driven by the 16% YoY drop in PHEV sales in 2Q22 (vs. -6% YoY in 1Q22). Moreover, even though BEV sales rose 11% YoY in 2Q22 (vs. +61% YoY in 1Q22), this was the weakest growth rate since 2Q20. The modest dynamics of Europe’s EV sales is slightly negative for the demand for battery metals: nickel, lithium and cobalt
#cars #EV #nickel #lithium #cobalt
🚗💨Internal combustion engine (ICE) car registrations in the EU fell 25% YoY in 2Q22 (after the 26% YoY decline in 1Q22). Petrol car sales were down 23% YoY in 2Q22 (vs. -21% YoY in 1Q22), while diesel car registrations slid 29% YoY in 2Q22 (decelerating from the 35% YoY drop in 1Q22). Diesel cars constituted 29% of ICE car sales in 2Q22, as they did in 1Q22 and 4Q21. Weak ICE car sales are unfavourable for PGM demand
🚘EU and UK EV sales fell 2% YoY in 2Q22 (vs. +24% YoY in 1Q22), the first negative dynamics since 4Q16. The decline was mostly driven by the 16% YoY drop in PHEV sales in 2Q22 (vs. -6% YoY in 1Q22). Moreover, even though BEV sales rose 11% YoY in 2Q22 (vs. +61% YoY in 1Q22), this was the weakest growth rate since 2Q20. The modest dynamics of Europe’s EV sales is slightly negative for the demand for battery metals: nickel, lithium and cobalt
#cars #EV #nickel #lithium #cobalt
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