Morning Bites (part 2)
🏆Global physical gold demand fell 2% YoY to 956t in 2Q22, with the decline decelerating from 13% YoY in 1Q22, according to the World Gold Council. At the same time, global total gold demand was down 9% YoY in 2Q22 (vs. +34% YoY in 1Q22). The decline in physical gold demand was mostly driven by the 14% YoY drop in the demand from central banks and other institutions. However, the demand for gold jewellery rose 4% YoY in 2Q22, reversing from the 7% YoY decline in 1Q22, on the back of the 49% YoY increase in India’s gold jewellery demand. Meanwhile, gold mine production rose 4% YoY in 2Q22, slightly accelerating from the 2% YoY increase in 1Q22
#gold
🏆Global physical gold demand fell 2% YoY to 956t in 2Q22, with the decline decelerating from 13% YoY in 1Q22, according to the World Gold Council. At the same time, global total gold demand was down 9% YoY in 2Q22 (vs. +34% YoY in 1Q22). The decline in physical gold demand was mostly driven by the 14% YoY drop in the demand from central banks and other institutions. However, the demand for gold jewellery rose 4% YoY in 2Q22, reversing from the 7% YoY decline in 1Q22, on the back of the 49% YoY increase in India’s gold jewellery demand. Meanwhile, gold mine production rose 4% YoY in 2Q22, slightly accelerating from the 2% YoY increase in 1Q22
#gold
Morning Bites
🚘Global EV sales (passenger cars and light-duty vehicles) rose 56% YoY in June, accelerating from the 49% YoY growth in May, according to Rho Motion. These strong dynamics were mostly driven by the acceleration in China’s sales growth to 129% YoY in June (from 105% YoY in May), on the back of new government support measures. Moreover, the growth rate of US & Canada EV sales also accelerated, to 26% YoY in June (from 14% YoY in May). However, EU & UK EV sales fell 6% YoY in June, reversing from the 5% YoY increase in May. The robust growth in global EV sales is supportive for the demand for battery metals (nickel, lithium and cobalt)
#EV #nickel #lithium #cobalt
🚘Global EV sales (passenger cars and light-duty vehicles) rose 56% YoY in June, accelerating from the 49% YoY growth in May, according to Rho Motion. These strong dynamics were mostly driven by the acceleration in China’s sales growth to 129% YoY in June (from 105% YoY in May), on the back of new government support measures. Moreover, the growth rate of US & Canada EV sales also accelerated, to 26% YoY in June (from 14% YoY in May). However, EU & UK EV sales fell 6% YoY in June, reversing from the 5% YoY increase in May. The robust growth in global EV sales is supportive for the demand for battery metals (nickel, lithium and cobalt)
#EV #nickel #lithium #cobalt
Morning Bites
🌏Global manufacturing PMIs slid in July. The US ISM manufacturing PMI declined to 52.8, from 53.0 in June, although it outperformed the Bloomberg consensus estimate of 52.0. The Eurozone Markit Manufacturing PMI fell to 49.8, from 52.1 in June (slightly above the market forecast of 49.6), entering the contraction area for the first time since June 2020. Moreover, China's official PMI decreased to 49.0 (from 50.2 in June), falling short of the consensus estimate of 50.4. Furthermore, China's Caixin manufacturing PMI declined to 50.4 in July, from 51.7 in June (missing the market forecast of 51.5). Below-50 manufacturing PMIs in China and the Eurozone indicate a manufacturing sector contraction in these regions, which supports our negative view on the demand for industrial metals. Meanwhile, even though the US Manufacturing PMI remained above 50, its negative dynamics imply that manufacturing activity in the US is softening
#PMIs
🌏Global manufacturing PMIs slid in July. The US ISM manufacturing PMI declined to 52.8, from 53.0 in June, although it outperformed the Bloomberg consensus estimate of 52.0. The Eurozone Markit Manufacturing PMI fell to 49.8, from 52.1 in June (slightly above the market forecast of 49.6), entering the contraction area for the first time since June 2020. Moreover, China's official PMI decreased to 49.0 (from 50.2 in June), falling short of the consensus estimate of 50.4. Furthermore, China's Caixin manufacturing PMI declined to 50.4 in July, from 51.7 in June (missing the market forecast of 51.5). Below-50 manufacturing PMIs in China and the Eurozone indicate a manufacturing sector contraction in these regions, which supports our negative view on the demand for industrial metals. Meanwhile, even though the US Manufacturing PMI remained above 50, its negative dynamics imply that manufacturing activity in the US is softening
#PMIs
Morning Bites - 2Q22 operating updates from key uranium miners (~53% of global mine supply)
⛏Kazatomprom has reported a 7% YoY decrease in production volumes in 2Q22 due to the lagged impact of COVID on wellfield development in 2021. However, the company has reiterated its 2022 production guidance of 21-22ktU. Meanwhile, sales volumes rose 31% YoY in 2Q22, due to the timing of customer-scheduled deliveries
⛏Cameco has reported 115% YoY production growth in 2Q22. This came from a low base, as operations at Cigar Lake were suspended until April 2021. Cameco reiterated its 2022 production guidance (100% basis) at up to 7.7ktU, with commissioning delays at McArthur River being exactly offset by the successful development work at Cigar Lake
❗️On the demand side, due to the energy crisis, Germany and South Korea (1% and 7% of global U demand, respectively) are considering cancelling their nuclear phase-out plans, which might support the demand for U. Overall, we still see a U market deficit in 2022
#uranium
⛏Kazatomprom has reported a 7% YoY decrease in production volumes in 2Q22 due to the lagged impact of COVID on wellfield development in 2021. However, the company has reiterated its 2022 production guidance of 21-22ktU. Meanwhile, sales volumes rose 31% YoY in 2Q22, due to the timing of customer-scheduled deliveries
⛏Cameco has reported 115% YoY production growth in 2Q22. This came from a low base, as operations at Cigar Lake were suspended until April 2021. Cameco reiterated its 2022 production guidance (100% basis) at up to 7.7ktU, with commissioning delays at McArthur River being exactly offset by the successful development work at Cigar Lake
❗️On the demand side, due to the energy crisis, Germany and South Korea (1% and 7% of global U demand, respectively) are considering cancelling their nuclear phase-out plans, which might support the demand for U. Overall, we still see a U market deficit in 2022
#uranium
⚒Finally, the first shipment of coking coal for thermal purposes
📌As we expected, the abnormal discount of Aus SSCC to Newcastle FOB ($271/t vs. $18/t hist. avg) has led to the substitution of thermal coal to SSCC in el. generation. US Arch Resources has sold a vessel from High-Vol B coking coal to a EU thermal coal utility; US Peabody Energy sees a similar trend
📝In terms of el. generation, SSCC has more calorific value than thermal: while SSCC brands have caloricity of 6,500-7,500 kcal/kg, Newcastle thermal coal benchmark has ~6,000. This means that to substitute 1t of thermal coal, a utility needs 0.8-0.9t of SSCC. HCC, which is even more caloric than SSCC, generally cannot be used in power generation due to its specific qualities
❗️Sales volumes of SSCC to utilities are not meaningful so far, but as the energy crisis in Europe persists and thermal coal remains in deficit, we think that the substituted volumes are to surge in the near term, widely supporting semi-soft coal prices
#coal
📌As we expected, the abnormal discount of Aus SSCC to Newcastle FOB ($271/t vs. $18/t hist. avg) has led to the substitution of thermal coal to SSCC in el. generation. US Arch Resources has sold a vessel from High-Vol B coking coal to a EU thermal coal utility; US Peabody Energy sees a similar trend
📝In terms of el. generation, SSCC has more calorific value than thermal: while SSCC brands have caloricity of 6,500-7,500 kcal/kg, Newcastle thermal coal benchmark has ~6,000. This means that to substitute 1t of thermal coal, a utility needs 0.8-0.9t of SSCC. HCC, which is even more caloric than SSCC, generally cannot be used in power generation due to its specific qualities
❗️Sales volumes of SSCC to utilities are not meaningful so far, but as the energy crisis in Europe persists and thermal coal remains in deficit, we think that the substituted volumes are to surge in the near term, widely supporting semi-soft coal prices
#coal
⚒Who would benefit most from coking coal price growth?
📌We consider 5 companies: Peabody (BTU US), Warrior Met Coal (HCC US), Mongolian Mining Corp. (MMC, 975 HK), Mechel (MTLR RX) and Raspadskaya (RASP RX)
❗️Assuming semi-soft coal quotes catch up with thermal coal, we estimate BTU, MMC, HCC and RASP to trade in the range of -0.3-0.2x 1-y fwd EV/EBITDA, which means that all of them are almost “free”. MMC has a ~240% FCF yield, which is the most attractive of the five
❗️MTLR is a relatively more expensive name due to hefty debt burden. MTLR trades 1.4x 1-y fwd EV/EBITDA with a 135% FCF yield
#coal
📌We consider 5 companies: Peabody (BTU US), Warrior Met Coal (HCC US), Mongolian Mining Corp. (MMC, 975 HK), Mechel (MTLR RX) and Raspadskaya (RASP RX)
❗️Assuming semi-soft coal quotes catch up with thermal coal, we estimate BTU, MMC, HCC and RASP to trade in the range of -0.3-0.2x 1-y fwd EV/EBITDA, which means that all of them are almost “free”. MMC has a ~240% FCF yield, which is the most attractive of the five
❗️MTLR is a relatively more expensive name due to hefty debt burden. MTLR trades 1.4x 1-y fwd EV/EBITDA with a 135% FCF yield
#coal
Morning Bites
🚘US light vehicle sales continued to decline in July: -12% YoY vs. -14% YoY in June. Seasonally-adjusted sales volumes fell 10% YoY in July, after the 15% YoY contraction in June. The two major reasons for the weakening car sales were the global shortage of automotive parts and inflationary pressures. The continuing decline in car sales is negative for PGM demand
💍The growth rate of Hong Kong jewellery & watch sales decelerated to 2% YoY in July, from 8% YoY in June. According to a HK government spokesperson, one of the reasons for the softer growth of retail sales was the climbing number of COVID-19 cases in HK. We note, however, that in August, the HK government plans to disburse the second set of stimulus vouchers, which might support jewellery sales in the country. The first tranche of the government support triggered a 14% YoY increase in jewellery sales in April, after the 36% YoY decline in March
#cars #diamonds
🚘US light vehicle sales continued to decline in July: -12% YoY vs. -14% YoY in June. Seasonally-adjusted sales volumes fell 10% YoY in July, after the 15% YoY contraction in June. The two major reasons for the weakening car sales were the global shortage of automotive parts and inflationary pressures. The continuing decline in car sales is negative for PGM demand
💍The growth rate of Hong Kong jewellery & watch sales decelerated to 2% YoY in July, from 8% YoY in June. According to a HK government spokesperson, one of the reasons for the softer growth of retail sales was the climbing number of COVID-19 cases in HK. We note, however, that in August, the HK government plans to disburse the second set of stimulus vouchers, which might support jewellery sales in the country. The first tranche of the government support triggered a 14% YoY increase in jewellery sales in April, after the 36% YoY decline in March
#cars #diamonds
Morning Bites (part 1)
🌡France is likely to extend the cuts to nuclear power generation due to high water temperatures, Bloomberg reports. Under French regulations, if river temperatures reach certain thresholds, nuclear plants must operate at reduced capacity, or be halted, in order to ensure that the water used for cooling does not harm the environment once it is put back into the river. Moreover, as we wrote before, French nuclear power generation is currently constrained by maintenance works and corrosion issues at some reactors. As a result, only 49% of the country’s nuclear capacity is currently in operation, according to Bloomberg. Reduced nuclear power generation in France is negative for uranium demand, given the country accounts for 13% of global uranium requirements. This might also support the demand for coal, as thermal power could be used to offset the lost nuclear capacity
#uranium #coal
🌡France is likely to extend the cuts to nuclear power generation due to high water temperatures, Bloomberg reports. Under French regulations, if river temperatures reach certain thresholds, nuclear plants must operate at reduced capacity, or be halted, in order to ensure that the water used for cooling does not harm the environment once it is put back into the river. Moreover, as we wrote before, French nuclear power generation is currently constrained by maintenance works and corrosion issues at some reactors. As a result, only 49% of the country’s nuclear capacity is currently in operation, according to Bloomberg. Reduced nuclear power generation in France is negative for uranium demand, given the country accounts for 13% of global uranium requirements. This might also support the demand for coal, as thermal power could be used to offset the lost nuclear capacity
#uranium #coal
Morning Bites (part 2)
📉CISA mills daily crude steel output fell 7.3% in late July from the second ten days of the month, reaching the lowest level since late November 2021. This represented a 10.3% YoY drop (vs. -7.1% YoY in mid-July). The continued decline in steel production might have been caused by the subdued demand and the high level of steel inventories, which were up 20.1% YoY as of 31 July. However, inventories decreased 12.8% from 20 to 31 July
🪨Russia's coal output fell 1% YoY in 1H22 (up 1 % YoY in June), according to Metal Expert. The half-year dynamics were roughly in line with our estimate. Thermal coal production was down 2% YoY, while coking coal output rose 4% YoY, in 1H22. Total coal sales (export + domestic) were roughly flat YoY in 1H22 and decreased 4% YoY in June. Total coal exports were flat YoY in 1H22 and fell 2% YoY in June, while domestic sales were up 2% YoY in 1H22 and down 7% YoY in June
#steel #coal
📉CISA mills daily crude steel output fell 7.3% in late July from the second ten days of the month, reaching the lowest level since late November 2021. This represented a 10.3% YoY drop (vs. -7.1% YoY in mid-July). The continued decline in steel production might have been caused by the subdued demand and the high level of steel inventories, which were up 20.1% YoY as of 31 July. However, inventories decreased 12.8% from 20 to 31 July
🪨Russia's coal output fell 1% YoY in 1H22 (up 1 % YoY in June), according to Metal Expert. The half-year dynamics were roughly in line with our estimate. Thermal coal production was down 2% YoY, while coking coal output rose 4% YoY, in 1H22. Total coal sales (export + domestic) were roughly flat YoY in 1H22 and decreased 4% YoY in June. Total coal exports were flat YoY in 1H22 and fell 2% YoY in June, while domestic sales were up 2% YoY in 1H22 and down 7% YoY in June
#steel #coal
🗞China has published preliminary import/export statistics for July. See preliminary data in the table above
#statistics #China
#statistics #China
Morning Bites (part 1)
🔗China’s finished steel net exports rose 27% YoY in July, after the 30% YoY increase in June. The growth might have been caused by the weak domestic steel demand in China. As we have written before, the sluggish demand led to the build-up of steel inventories, which were up 20.1% YoY at the end of July. As a result, in late July, China’s steel manufacturers decreased their average daily crude steel output to the lowest level since late November 2021
📈China’s unwrought aluminium and product exports rose 39% YoY in July (vs. +34% YoY in June). According to industry reports, the increase in exports might have been caused by the China's subdued domestic demand for aluminium, partially due to the slowdown in the country’s construction sector
#steel #aluminium
🔗China’s finished steel net exports rose 27% YoY in July, after the 30% YoY increase in June. The growth might have been caused by the weak domestic steel demand in China. As we have written before, the sluggish demand led to the build-up of steel inventories, which were up 20.1% YoY at the end of July. As a result, in late July, China’s steel manufacturers decreased their average daily crude steel output to the lowest level since late November 2021
📈China’s unwrought aluminium and product exports rose 39% YoY in July (vs. +34% YoY in June). According to industry reports, the increase in exports might have been caused by the China's subdued domestic demand for aluminium, partially due to the slowdown in the country’s construction sector
#steel #aluminium
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Morning Bites (part 2)
📉Gold-backed ETFs reduced their holdings through July, with net outflows at 84t (after outflows of 32t in June and 51t in May). This was the largest net outflow since March 2021. According to the World Gold Council (WGC), the outflows were mainly caused by the interest rate hikes in the US and Europe. In addition, according to the WGC, the late-July rebound in US equities encouraged some North American investors to shift into riskier assets. We note, however, that gold investment demand might recover in the coming months amid rising inflation
#ETF #gold
📉Gold-backed ETFs reduced their holdings through July, with net outflows at 84t (after outflows of 32t in June and 51t in May). This was the largest net outflow since March 2021. According to the World Gold Council (WGC), the outflows were mainly caused by the interest rate hikes in the US and Europe. In addition, according to the WGC, the late-July rebound in US equities encouraged some North American investors to shift into riskier assets. We note, however, that gold investment demand might recover in the coming months amid rising inflation
#ETF #gold
Morning Bites (part 1)
🚘New car registrations in France, the UK, Spain, Italy and Germany fell 9% YoY in July (from a low base), according to the preliminary data, which was a deceleration from the 17% YoY in June. In both Germany and Spain, car sales fell 13% YoY. Car sales in France and the UK were down 7% YoY and 9% YoY, respectively, while Italy’s car sales fell 1% YoY. Given that these 5 countries accounted for 70% of total new vehicle sales in Europe in 2021, this means that the decline in EU+UK car registrations continued in July. The full results for July and August sales are to be published on 16 September
💍According to MasterCard SpendingPulse, preliminary US jewellery sales rose 19% YoY in July (vs. +16% YoY in June). The MasterCard data shows that the July dynamics were mainly driven by emotional spending across consumers. Robust jewellery sales are positive for diamond demand, but the unfavourable economic environment might constrain jewellery purchases in the near term
#cars #diamonds
🚘New car registrations in France, the UK, Spain, Italy and Germany fell 9% YoY in July (from a low base), according to the preliminary data, which was a deceleration from the 17% YoY in June. In both Germany and Spain, car sales fell 13% YoY. Car sales in France and the UK were down 7% YoY and 9% YoY, respectively, while Italy’s car sales fell 1% YoY. Given that these 5 countries accounted for 70% of total new vehicle sales in Europe in 2021, this means that the decline in EU+UK car registrations continued in July. The full results for July and August sales are to be published on 16 September
💍According to MasterCard SpendingPulse, preliminary US jewellery sales rose 19% YoY in July (vs. +16% YoY in June). The MasterCard data shows that the July dynamics were mainly driven by emotional spending across consumers. Robust jewellery sales are positive for diamond demand, but the unfavourable economic environment might constrain jewellery purchases in the near term
#cars #diamonds
Morning Bites (part 2)
📈MMK has announced a 4% increase in the domestic HRC price for September to RUB 44k/t (USD 728/t) excluding tax. According to Metal Expert, the price increase might have been motivated by the sufficient volume of orders in the current month. We also note that, if other producers follow the price increase, the domestic premium might widen to USD 167/t, from the current USD 141/t (other things being equal). While this does not have a significant fundamental effect on companies' valuations, it might bring strong sentiment support for Severstal and MMK
#steel #rusteel
📈MMK has announced a 4% increase in the domestic HRC price for September to RUB 44k/t (USD 728/t) excluding tax. According to Metal Expert, the price increase might have been motivated by the sufficient volume of orders in the current month. We also note that, if other producers follow the price increase, the domestic premium might widen to USD 167/t, from the current USD 141/t (other things being equal). While this does not have a significant fundamental effect on companies' valuations, it might bring strong sentiment support for Severstal and MMK
#steel #rusteel
Morning Bites
❌MMK has refuted information regarding the increase in domestic HRC prices for September, according to Metal Expert. Previously, Metal Expert reported that the company had announced a 4% increase in the domestic HRC price for September. According to the latest update from Metal Expert, the company stated that it had not determined the prices for September yet
🔗Turkey’s steel production fell 13% YoY in June, with the decline rate accelerating from 1% YoY in May. According to our calculations, Turkey’s apparent steel consumption was roughly flat YoY in June (vs. the 1% YoY increase in May). In our view, the decrease in production might have been caused by rising energy costs and weak steel demand from the EU, shown by the 18% YoY decline in steel exports (vs. -24% YoY in May). Meanwhile, steel imports rose 10% YoY in June, reversing from the 23% YoY decline in May
#steel #rusteel
❌MMK has refuted information regarding the increase in domestic HRC prices for September, according to Metal Expert. Previously, Metal Expert reported that the company had announced a 4% increase in the domestic HRC price for September. According to the latest update from Metal Expert, the company stated that it had not determined the prices for September yet
🔗Turkey’s steel production fell 13% YoY in June, with the decline rate accelerating from 1% YoY in May. According to our calculations, Turkey’s apparent steel consumption was roughly flat YoY in June (vs. the 1% YoY increase in May). In our view, the decrease in production might have been caused by rising energy costs and weak steel demand from the EU, shown by the 18% YoY decline in steel exports (vs. -24% YoY in May). Meanwhile, steel imports rose 10% YoY in June, reversing from the 23% YoY decline in May
#steel #rusteel