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
Morning Bites (part 1)
📉Copper output in Chile and Peru fell 1% YoY in June (vs. -5% YoY in May). Given that, combined, they account for 37% of global mine copper supply, this might be slightly positive for copper prices
🇨🇱Chile’s copper production decreased 5% YoY in June (vs. -3% YoY in May). This was mainly caused by the weak performance of state-owned Codelco (~30% of the country’s mine copper production): its output fell 14% YoY in June due to lower grades and recovery rates
🇵🇪Peru’s copper output rose 9% YoY in June, reversing from the 11% YoY decline in May. The production recovery was partially driven by the restart of Las Bambas mine in early June (1.7% of global copper supply) due to the truce granted by local communities that were protesting at the mine. The truce, however, came to an end in late July with no agreement reached, therefore further disruptions are possible
#copper
📉Copper output in Chile and Peru fell 1% YoY in June (vs. -5% YoY in May). Given that, combined, they account for 37% of global mine copper supply, this might be slightly positive for copper prices
🇨🇱Chile’s copper production decreased 5% YoY in June (vs. -3% YoY in May). This was mainly caused by the weak performance of state-owned Codelco (~30% of the country’s mine copper production): its output fell 14% YoY in June due to lower grades and recovery rates
🇵🇪Peru’s copper output rose 9% YoY in June, reversing from the 11% YoY decline in May. The production recovery was partially driven by the restart of Las Bambas mine in early June (1.7% of global copper supply) due to the truce granted by local communities that were protesting at the mine. The truce, however, came to an end in late July with no agreement reached, therefore further disruptions are possible
#copper
Morning Bites (part 2)
🏗China’s domestic excavator sales fell 25% YoY in July (vs. -35% YoY in June). Meanwhile, total excavator sales (domestic + export) were up 3% YoY in July (vs. the 10% YoY decline June). Weak domestic excavator sales indicate that construction activity in China might remain subdued in the near term, which would be negative for the demand for industrial metals. However, it is worth noting that the rate of decline in China’s domestic excavator sales has been steadily decreasing for 4 months, from -64% YoY in March
#steel #aluminium #copper
🏗China’s domestic excavator sales fell 25% YoY in July (vs. -35% YoY in June). Meanwhile, total excavator sales (domestic + export) were up 3% YoY in July (vs. the 10% YoY decline June). Weak domestic excavator sales indicate that construction activity in China might remain subdued in the near term, which would be negative for the demand for industrial metals. However, it is worth noting that the rate of decline in China’s domestic excavator sales has been steadily decreasing for 4 months, from -64% YoY in March
#steel #aluminium #copper
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🥇What's happening with gold producer costs?
📈Propelled by inflation, the marginal costs of global gold producers have increased 15% YoY in 1Q22. Based on 2Q22 financial reports so far, we see a further >10% QoQ increase in costs
📉As global marginal costs are already close to $2,000/oz, 10-20% of global gold mining assets have negative operating margins already (compared with the average 10-20% historical margin of the marginal producer)
📌Soaring production costs are likely to be the main supporting factor for gold prices in the medium term. If inflationary pressure persists, the gold price might catch up with marginal costs and then grow further to restore the marginal producer’s premium
#gold
📈Propelled by inflation, the marginal costs of global gold producers have increased 15% YoY in 1Q22. Based on 2Q22 financial reports so far, we see a further >10% QoQ increase in costs
📉As global marginal costs are already close to $2,000/oz, 10-20% of global gold mining assets have negative operating margins already (compared with the average 10-20% historical margin of the marginal producer)
📌Soaring production costs are likely to be the main supporting factor for gold prices in the medium term. If inflationary pressure persists, the gold price might catch up with marginal costs and then grow further to restore the marginal producer’s premium
#gold
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🏆Which gold producers are worth looking at?
💰After the derating in gold which has occurred over the last several months (the multiples of most major producers have slumped ~15-40% vs. their April-May levels), and ahead of a potential upward correction in gold, most global producers look interesting at spot
💰Among the majors, Kinross and Newcrest look the most appealing. On spot prices, Kinross trades at 3.3x 1-y fwd EV/EBITDA, a 15% FCF yield and a 6% dividend and buyback yield. Meanwhile, Newcrest offers a 3.9x 1-y fwd EV/EBITDA, 7% FCF yield and 2% dividend and buyback yield
💰Newmont and Barrick, the two major names in the gold industry, are also worth considering, even though they are a bit more expensive. The two companies currently trade at 6.0-7.2x EV/EBITDA, with a 5-6% FCF yield and a 3-5% dividend yield
📌Meanwhile, Fresnillo appears too expensive, at 7.7x EV/EBITDA, which makes it less attractive than its peers
#gold
💰After the derating in gold which has occurred over the last several months (the multiples of most major producers have slumped ~15-40% vs. their April-May levels), and ahead of a potential upward correction in gold, most global producers look interesting at spot
💰Among the majors, Kinross and Newcrest look the most appealing. On spot prices, Kinross trades at 3.3x 1-y fwd EV/EBITDA, a 15% FCF yield and a 6% dividend and buyback yield. Meanwhile, Newcrest offers a 3.9x 1-y fwd EV/EBITDA, 7% FCF yield and 2% dividend and buyback yield
💰Newmont and Barrick, the two major names in the gold industry, are also worth considering, even though they are a bit more expensive. The two companies currently trade at 6.0-7.2x EV/EBITDA, with a 5-6% FCF yield and a 3-5% dividend yield
📌Meanwhile, Fresnillo appears too expensive, at 7.7x EV/EBITDA, which makes it less attractive than its peers
#gold
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Morning Bites
💍US jewellery and watch sales were up 0.8% YoY in June (vs. the revised 5.1% YoY increase in May), according to data from the US Department of Commerce. This was the weakest growth rate since May 2020. As we have noted before, soaring inflation negatively affects jewellery sales. This worsens the outlook for diamond demand
🇿🇦South Africa’s PGM mining production fell 10% YoY in June (vs. +4% YoY in May). At the same time, the country’s gold output fell 29% YoY in June (vs. -28% YoY in May). According to industry sources, the main reasons for the decline in South Africa’s mining output were persistent power cuts, growing production costs, labour shortages and supply chain disruptions. Given that South Africa accounts for some 70% and 34% of Pd and Pt supply, respectively, and for 3% of global gold production, the decline in output might be a slightly positive factor for PGM and gold prices
#diamonds #PGMs #gold
💍US jewellery and watch sales were up 0.8% YoY in June (vs. the revised 5.1% YoY increase in May), according to data from the US Department of Commerce. This was the weakest growth rate since May 2020. As we have noted before, soaring inflation negatively affects jewellery sales. This worsens the outlook for diamond demand
🇿🇦South Africa’s PGM mining production fell 10% YoY in June (vs. +4% YoY in May). At the same time, the country’s gold output fell 29% YoY in June (vs. -28% YoY in May). According to industry sources, the main reasons for the decline in South Africa’s mining output were persistent power cuts, growing production costs, labour shortages and supply chain disruptions. Given that South Africa accounts for some 70% and 34% of Pd and Pt supply, respectively, and for 3% of global gold production, the decline in output might be a slightly positive factor for PGM and gold prices
#diamonds #PGMs #gold
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🗞Today, China has published its industrial production data for July (see the table above)
#statistics #China
#statistics #China
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Morning Bites (part 1)
📌China’s crude steel output fell 6.4% YoY in July (vs. -3.3% YoY in June). This deepening decline was mostly driven by weak domestic demand: China’s apparent steel consumption was down 8% YoY in July (vs. -5% YoY in June), due to weak manufacturing activity and the depressed construction sector
🏢China property sales fell 29% YoY in July (vs. -18% YoY in June). Moreover, floor space starts decreased 45% YoY in July (the same as in June). Meanwhile, property completions declined 36% YoY in July (vs. -41% YoY in June). At the same time, the rate of decline in China’s personal mortgage loans accelerated slightly to 23% YoY in July, from 20% YoY in June. The continued weakening of China’s property sector is a negative factor for the demand for industrial metals
#China #steel #aluminium #copper
📌China’s crude steel output fell 6.4% YoY in July (vs. -3.3% YoY in June). This deepening decline was mostly driven by weak domestic demand: China’s apparent steel consumption was down 8% YoY in July (vs. -5% YoY in June), due to weak manufacturing activity and the depressed construction sector
🏢China property sales fell 29% YoY in July (vs. -18% YoY in June). Moreover, floor space starts decreased 45% YoY in July (the same as in June). Meanwhile, property completions declined 36% YoY in July (vs. -41% YoY in June). At the same time, the rate of decline in China’s personal mortgage loans accelerated slightly to 23% YoY in July, from 20% YoY in June. The continued weakening of China’s property sector is a negative factor for the demand for industrial metals
#China #steel #aluminium #copper