Morning Bites
💍US jewellery and watch sales rose 10.2% YoY in July, according to data from the US Department of Commerce. The growth rate accelerated from the revised 5.3% YoY increase in June (previously, a 0.8% YoY growth was reported for June). Even though there has been some revival in US jewellery sales, our outlook on jewellery demand remains negative due to the inflationary pressures
💍Hong Kong jewellery and watch sales jumped 28% YoY in July, after a 2% YoY increase in June. According to Reuters, the increase was mainly caused by government support measures and improved labour market conditions
#diamonds
💍US jewellery and watch sales rose 10.2% YoY in July, according to data from the US Department of Commerce. The growth rate accelerated from the revised 5.3% YoY increase in June (previously, a 0.8% YoY growth was reported for June). Even though there has been some revival in US jewellery sales, our outlook on jewellery demand remains negative due to the inflationary pressures
💍Hong Kong jewellery and watch sales jumped 28% YoY in July, after a 2% YoY increase in June. According to Reuters, the increase was mainly caused by government support measures and improved labour market conditions
#diamonds
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Morning Bites
💎Petra Diamonds has reported sales of USD 103mn for Tender 1 of FY23 (ending June), which was 11% above the Tender 6 FY22 sales but down 10% YoY. At Tender 1 FY23, the company sold 520kct (9% below the Tender 6 volume and down 10% YoY). According to Petra CEO Richard Duffy, the increase in sales relative to Tender 6 was caused by the large proportion of high-value gem-quality stones from the Cullinan mine. As a result, the average realised price was 21% higher, despite the 4.5% decline in LfL rough diamond prices relative to Tender 6 FY22. We note that the decrease in LfL prices might signal a softening in demand. The company expects some volatility in rough prices in the short term due to the unfavourable macroeconomic conditions, which is in line with our view
#diamonds $PDL
💎Petra Diamonds has reported sales of USD 103mn for Tender 1 of FY23 (ending June), which was 11% above the Tender 6 FY22 sales but down 10% YoY. At Tender 1 FY23, the company sold 520kct (9% below the Tender 6 volume and down 10% YoY). According to Petra CEO Richard Duffy, the increase in sales relative to Tender 6 was caused by the large proportion of high-value gem-quality stones from the Cullinan mine. As a result, the average realised price was 21% higher, despite the 4.5% decline in LfL rough diamond prices relative to Tender 6 FY22. We note that the decrease in LfL prices might signal a softening in demand. The company expects some volatility in rough prices in the short term due to the unfavourable macroeconomic conditions, which is in line with our view
#diamonds $PDL
Petra Diamonds FY22 (ending June) results
📈Petra Diamonds (PDL LN) reported strong FY22 results. In 2H FY22, revenue rose 43% YoY, while the adjusted EBITDA jumped 109% YoY. We note that the revenue for 4Q FY22 had already been disclosed
💰In addition, the company has announced its dividend policy (previously the company did not pay dividends). In accordance with the policy, the company intends to pay 15-35% of its FCF, starting with FY23. On our numbers, given the announced range, the company might generate a 5-11% dividend yield for FY23 (on spot). We also note that, given the reduction of Net Debt to 0.18x of EBITDA in FY22, the company, as it states in its release, might consider paying a special dividend, which could lift the dividend yield to 20-30%
💰On spot, Petra Diamonds trades at 1.3x 1-y fwd EV/EBITDA, generates 30% FCF yield and 7% dividend yield (in NTM)
#diamonds $PDL
📈Petra Diamonds (PDL LN) reported strong FY22 results. In 2H FY22, revenue rose 43% YoY, while the adjusted EBITDA jumped 109% YoY. We note that the revenue for 4Q FY22 had already been disclosed
💰In addition, the company has announced its dividend policy (previously the company did not pay dividends). In accordance with the policy, the company intends to pay 15-35% of its FCF, starting with FY23. On our numbers, given the announced range, the company might generate a 5-11% dividend yield for FY23 (on spot). We also note that, given the reduction of Net Debt to 0.18x of EBITDA in FY22, the company, as it states in its release, might consider paying a special dividend, which could lift the dividend yield to 20-30%
💰On spot, Petra Diamonds trades at 1.3x 1-y fwd EV/EBITDA, generates 30% FCF yield and 7% dividend yield (in NTM)
#diamonds $PDL
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Morning Bites
🇿🇦South Africa’s PGM mining production fell 12% YoY in July (after the -10% YoY in June). At the same time, the country’s gold output fell 20% YoY in July (vs. -29% YoY in June). According to some industry experts, the continuing decline in South Africa’s mining output was mainly driven by intense power outages in July and by logistical issues. Given that South Africa accounts for some 70% and 38% of platinum and palladium supply, respectively, and for 3% of global gold production, the contraction in output might be slightly positive for the prices of PGMs and gold
#PGMs #gold
🇿🇦South Africa’s PGM mining production fell 12% YoY in July (after the -10% YoY in June). At the same time, the country’s gold output fell 20% YoY in July (vs. -29% YoY in June). According to some industry experts, the continuing decline in South Africa’s mining output was mainly driven by intense power outages in July and by logistical issues. Given that South Africa accounts for some 70% and 38% of platinum and palladium supply, respectively, and for 3% of global gold production, the contraction in output might be slightly positive for the prices of PGMs and gold
#PGMs #gold
🗞Today China has published its industrial production data for August (see the table above)
#statistics #China
#statistics #China
Morning Bites (part 1)
📈CISA mills daily crude steel output increased 3.3% in early September from the last ten days of August. Moreover, this constituted a 2.7% YoY increase (vs. the 0.9% YoY decline in late August). According to Metal Expert, China’s steel manufacturers started to increase production, expecting the seasonal recovery in steel demand from the construction sector. However, the production growth was apparently not supported by demand, since the level of steel inventories rose 7% from 31 August to 10 September. As of 10 September, steel inventories were up 28% YoY. We keep our negative outlook on China’s steel output in the short term, given the planned output reduction and the uncertain prospects for China’s construction activity
#steel
📈CISA mills daily crude steel output increased 3.3% in early September from the last ten days of August. Moreover, this constituted a 2.7% YoY increase (vs. the 0.9% YoY decline in late August). According to Metal Expert, China’s steel manufacturers started to increase production, expecting the seasonal recovery in steel demand from the construction sector. However, the production growth was apparently not supported by demand, since the level of steel inventories rose 7% from 31 August to 10 September. As of 10 September, steel inventories were up 28% YoY. We keep our negative outlook on China’s steel output in the short term, given the planned output reduction and the uncertain prospects for China’s construction activity
#steel
Morning Bites (part 2)
🔗China’s crude steel output rose 0.5% YoY in August, reversing from the 6.4% YoY decline in July. The production recovery might have been caused by the steelmakers’ improved outlook on steel demand. In August, apparent steel consumption indeed slightly recovered, with the rate of decline decelerating to 1% YoY, from 8% YoY in July
🏢China's property sales fell 23% YoY in August (vs. -29% YoY in July). Moreover, floor space starts dropped 46% YoY in August, after the 45% YoY decline in July. At the same time, personal mortgage loans were down 18% YoY in August (vs. -23% YoY in July). However, property completions fell only 3% YoY in August (vs. -36% YoY in July). We note that the continued decline in property starts is negative for steel demand, while the 42% MoM recovery of property completions might be positive for copper and aluminium demand
#steel #aluminium #copper
🔗China’s crude steel output rose 0.5% YoY in August, reversing from the 6.4% YoY decline in July. The production recovery might have been caused by the steelmakers’ improved outlook on steel demand. In August, apparent steel consumption indeed slightly recovered, with the rate of decline decelerating to 1% YoY, from 8% YoY in July
🏢China's property sales fell 23% YoY in August (vs. -29% YoY in July). Moreover, floor space starts dropped 46% YoY in August, after the 45% YoY decline in July. At the same time, personal mortgage loans were down 18% YoY in August (vs. -23% YoY in July). However, property completions fell only 3% YoY in August (vs. -36% YoY in July). We note that the continued decline in property starts is negative for steel demand, while the 42% MoM recovery of property completions might be positive for copper and aluminium demand
#steel #aluminium #copper
Morning Bites (part 3)
📈The growth rate of China’s aluminium production accelerated to 10% YoY in August, from 6% YoY in July. According to Reuters, the increase was caused by the launch of new production capacity, which offset the impact of power shortages in some provinces. We also note that the partial 'recovery' of property completions might have supported China’s aluminium demand
🔗ArcelorMittal expects its EU steel production to fall ~17% YoY (by 1.5mnt) in 4Q22, as the company reduces its production capacity in the EU due to weak demand and rising energy costs. We note that the output curtailment might be equal to 4% of the EU's 4Q21 steel production
#aluminium #steel
📈The growth rate of China’s aluminium production accelerated to 10% YoY in August, from 6% YoY in July. According to Reuters, the increase was caused by the launch of new production capacity, which offset the impact of power shortages in some provinces. We also note that the partial 'recovery' of property completions might have supported China’s aluminium demand
🔗ArcelorMittal expects its EU steel production to fall ~17% YoY (by 1.5mnt) in 4Q22, as the company reduces its production capacity in the EU due to weak demand and rising energy costs. We note that the output curtailment might be equal to 4% of the EU's 4Q21 steel production
#aluminium #steel
Morning Bites (part 1)
📌China’s new internal combustion engine car sales rose 16% YoY in August, after the 15% YoY increase in July. The increase in sales was mainly driven by the government support measures. Given that China’s automotive industry accounts for some 26% and 17% of global autocatalyst Pd and Pt demand, respectively, this might be supportive for PGM demand
📌China’s new EV sales increased 104% YoY in August, after the 117% YoY growth in the previous month. Surging EV sales in China are positive for the demand for battery metals (nickel, lithium and cobalt), given that China accounts for 49% of global EV sales
#cars #EV #nickel #lithium #cobalt
📌China’s new internal combustion engine car sales rose 16% YoY in August, after the 15% YoY increase in July. The increase in sales was mainly driven by the government support measures. Given that China’s automotive industry accounts for some 26% and 17% of global autocatalyst Pd and Pt demand, respectively, this might be supportive for PGM demand
📌China’s new EV sales increased 104% YoY in August, after the 117% YoY growth in the previous month. Surging EV sales in China are positive for the demand for battery metals (nickel, lithium and cobalt), given that China accounts for 49% of global EV sales
#cars #EV #nickel #lithium #cobalt
Morning Bites (part 2)
🚘EU + UK passenger car registrations were up 4% YoY in August, reversing from the 10% YoY decline in July. However, this was 31% below the pre-pandemic 2019 level. The actual results were close to the preliminary data. According to some articles, the slight recovery might have been caused by the easing parts shortage. However, since high energy costs are pressuring European households' disposable income, the future dynamics of EU vehicle sales remain uncertain
#cars
🚘EU + UK passenger car registrations were up 4% YoY in August, reversing from the 10% YoY decline in July. However, this was 31% below the pre-pandemic 2019 level. The actual results were close to the preliminary data. According to some articles, the slight recovery might have been caused by the easing parts shortage. However, since high energy costs are pressuring European households' disposable income, the future dynamics of EU vehicle sales remain uncertain
#cars
Morning Bites
💎India’s rough diamond net imports rose 10% YoY in August, after the 27% YoY increase in July. Meanwhile, India’s polished diamond net exports fell 9% YoY in August (vs. -16% YoY in July). In our view, the decline in polished diamond net exports might signal a softening in downstream demand amid rising inflation. Meanwhile, India’s lab-grown rough diamond net imports rose 62% YoY in August (vs. the 21% YoY increase in July). The share of lab-grown net rough imports in natural diamond imports increased to 9% in August, from 7% in July
#diamonds
💎India’s rough diamond net imports rose 10% YoY in August, after the 27% YoY increase in July. Meanwhile, India’s polished diamond net exports fell 9% YoY in August (vs. -16% YoY in July). In our view, the decline in polished diamond net exports might signal a softening in downstream demand amid rising inflation. Meanwhile, India’s lab-grown rough diamond net imports rose 62% YoY in August (vs. the 21% YoY increase in July). The share of lab-grown net rough imports in natural diamond imports increased to 9% in August, from 7% in July
#diamonds
Morning Bites
📉China’s ROM iron ore output fell 3.9% YoY in August, after the 3.5% YoY decline in July. According to Metal Expert, this was mainly caused by the subdued demand for iron ore from steelmakers amid quarantine restrictions, power cuts and unfavourable weather conditions. The weak demand for iron ore was also shown by the 9% YoY increase in iron ore inventories at Chinese ports, as of the end of August. In our view, the demand for iron ore might remain weak in the near term, given the targeted steel output reduction and the depressed construction activity in China
#iron_ore
📉China’s ROM iron ore output fell 3.9% YoY in August, after the 3.5% YoY decline in July. According to Metal Expert, this was mainly caused by the subdued demand for iron ore from steelmakers amid quarantine restrictions, power cuts and unfavourable weather conditions. The weak demand for iron ore was also shown by the 9% YoY increase in iron ore inventories at Chinese ports, as of the end of August. In our view, the demand for iron ore might remain weak in the near term, given the targeted steel output reduction and the depressed construction activity in China
#iron_ore
Morning Bites (part 1)
🪨China’s coking coal imports rose 37% YoY in August, after the 62% YoY increase in July. The main contributor to the growth was imports from Mongolia (45% of total imports), which jumped 167% YoY in August due to easing quarantine measures at the Mongolian border. Meanwhile, imports from Russia (30% of the total) were up 60% YoY. The increase in coking coal imports might have been driven by two key factors. First, China’s steel production recovered slightly in August (+0.5% YoY; +3% MoM). Second, coking coal demand might have been supported by its use for thermal power generation, given the limited availability of thermal coal
#coal
🪨China’s coking coal imports rose 37% YoY in August, after the 62% YoY increase in July. The main contributor to the growth was imports from Mongolia (45% of total imports), which jumped 167% YoY in August due to easing quarantine measures at the Mongolian border. Meanwhile, imports from Russia (30% of the total) were up 60% YoY. The increase in coking coal imports might have been driven by two key factors. First, China’s steel production recovered slightly in August (+0.5% YoY; +3% MoM). Second, coking coal demand might have been supported by its use for thermal power generation, given the limited availability of thermal coal
#coal
Morning Bites (part 2)
📈NLMK has announced a 4% increase in the domestic HRC price for traders to RUB 45.1k/t (USD 739/t) excluding VAT, Metal Expert reports. According to Metal Expert, the price was supported by the maintenance works scheduled for next month. NLMK’s price is roughly in line with the new price level recently announced by Severstal. We note that, given the price increase, the domestic premium might widen to USD 178/t, from the current USD 150/t (other things being equal)
#steel #rusteel
📈NLMK has announced a 4% increase in the domestic HRC price for traders to RUB 45.1k/t (USD 739/t) excluding VAT, Metal Expert reports. According to Metal Expert, the price was supported by the maintenance works scheduled for next month. NLMK’s price is roughly in line with the new price level recently announced by Severstal. We note that, given the price increase, the domestic premium might widen to USD 178/t, from the current USD 150/t (other things being equal)
#steel #rusteel
Morning Bites
🔗Global crude steel output fell 3% YoY to 151mnt in August, with the rate of decline decelerating from the 6.5% YoY in July, according to the World Steel Association. This was driven by the slight recovery in China’s steel production: +0.5% YoY in August vs. -6.4% YoY in July. China accounted for 56% of global steel production in August (vs. 55% in July). Meanwhile, the decline in ex-China steel production deepened to 7.1% YoY, from 6.6% YoY in July. Steel output in the EU dropped 13.3% YoY, with the decline rate accelerating from 6.7% YoY in July, due to production stoppages amid high energy prices. Meanwhile, US steel production contracted 7.1% YoY (vs. -6.4% YoY in July). However, the decline in Russia’s steel output slowed to 5.5% YoY in August, from 13.2% YoY in July
📉In our view, global steel output might continue to decline in the near term due to the economic slowdown
#steel
🔗Global crude steel output fell 3% YoY to 151mnt in August, with the rate of decline decelerating from the 6.5% YoY in July, according to the World Steel Association. This was driven by the slight recovery in China’s steel production: +0.5% YoY in August vs. -6.4% YoY in July. China accounted for 56% of global steel production in August (vs. 55% in July). Meanwhile, the decline in ex-China steel production deepened to 7.1% YoY, from 6.6% YoY in July. Steel output in the EU dropped 13.3% YoY, with the decline rate accelerating from 6.7% YoY in July, due to production stoppages amid high energy prices. Meanwhile, US steel production contracted 7.1% YoY (vs. -6.4% YoY in July). However, the decline in Russia’s steel output slowed to 5.5% YoY in August, from 13.2% YoY in July
📉In our view, global steel output might continue to decline in the near term due to the economic slowdown
#steel
Morning Bites (part 1)
📈CISA mills daily crude steel output rose 2.2% in the second ten days of September from the first ten days of the month. This also constituted 7.7% YoY growth (vs. +2.7% YoY in early September). Industry sources say that production was increased in anticipation of the seasonal strengthening of steel demand in September - October. Moreover, according to market sources, China’s government is unlikely to order steel output cuts during these months. However, we do not see any reason for the steel output growth (unless from the low base), given the weak steel demand from the construction sector. In mid-September, the increased production was not supported by steel demand, as steel inventories increased 3.5% through the period and were up 32.8% YoY as of 20 September
#steel
📈CISA mills daily crude steel output rose 2.2% in the second ten days of September from the first ten days of the month. This also constituted 7.7% YoY growth (vs. +2.7% YoY in early September). Industry sources say that production was increased in anticipation of the seasonal strengthening of steel demand in September - October. Moreover, according to market sources, China’s government is unlikely to order steel output cuts during these months. However, we do not see any reason for the steel output growth (unless from the low base), given the weak steel demand from the construction sector. In mid-September, the increased production was not supported by steel demand, as steel inventories increased 3.5% through the period and were up 32.8% YoY as of 20 September
#steel
Morning Bites (part 2)
💍China’s jewellery and watch retail sales increased 7% YoY in August, following the 22% YoY jump in July. According to Rough & Polished, the solid performance of China’s jewellery sales was caused by the gradual easing of travel and quarantine rules in recent months. Growing jewellery sales in China is a positive factor for diamond demand. However, the unstable global economic environment still poses risks for downstream demand
⛔️Trevali has decided to close the Perkoa zinc mine in Burkina Faso following a deadly flood in April. Operations at the mine have been halted since then. We note that Perkoa accounts for ~0.5% of global zinc production. Since August, trading of the company’s common shares on the Toronto Stock Exchange has been halted, as the company had filed for creditor protection
#diamonds #zinc
💍China’s jewellery and watch retail sales increased 7% YoY in August, following the 22% YoY jump in July. According to Rough & Polished, the solid performance of China’s jewellery sales was caused by the gradual easing of travel and quarantine rules in recent months. Growing jewellery sales in China is a positive factor for diamond demand. However, the unstable global economic environment still poses risks for downstream demand
⛔️Trevali has decided to close the Perkoa zinc mine in Burkina Faso following a deadly flood in April. Operations at the mine have been halted since then. We note that Perkoa accounts for ~0.5% of global zinc production. Since August, trading of the company’s common shares on the Toronto Stock Exchange has been halted, as the company had filed for creditor protection
#diamonds #zinc