📌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

📌Global central banks were net sellers of 6t of gold in February
• Up from 5t in January
• The biggest seller was Uzbekistan, which sold 22t of gold in February (vs. 1t in January)
• Meanwhile, Turkey was the biggest purchaser, with 25t of gold purchases in February (vs. 10t in January)
❗️The central banks’ gold net sales might negatively affect gold prices

#gold

📌Brazil's iron ore exports rose 2% YoY in March, reversing from a 20% YoY decline in February
• The recovery in the country's iron ore exports might have been caused by improved weather conditions 
❗️Given Brazil accounts for some 22% of the global seaborne iron ore market, this might adversely affect iron ore prices

#iron_ore

⛏Iron ore and coking coal prices both increased 13% in March. Iron ore prices were driven up by China’s logistical disruptions amid a COVID-19 lockdown and heavy rains in Brazil. Meanwhile, coking coal prices were mostly supported by wet weather in Australia

• In April, the demand for steelmaking raw materials is likely to be driven by the gradual removal of COVID-19 restrictions in Tangshan, China’s main steelmaking city

• On the supply side, coking coal output might continue to be pressured due to heavy rains in Australia, which, coupled with the recovery in demand, could support prices at the current high levels. However, iron ore prices are likely to see some downside given supply has started to recover: Brazil's iron ore exports rose 2% YoY as rainfall passed the peak

• We also note downside risk for long term iron ore prices amid CSN’s production expansion (5% of seaborne supply) and the launch of the Simandou project (4% of supply)

#iron_ore #coking_coal #steel #raw_materials

 ⛏Russia’s steelmakers kept domestic steel prices flat in roubles amid a soft agreement with authorities
 
• As such, domestic steel prices were roughly flat in roubles in March. Meanwhile, the discount to export prices narrowed 70% to USD 91/t amid appreciation of the rouble
 
• Prices for coking coal in Russia are fixed until June in order to stabilise steelmaking raw material prices. Furthermore, the Russian authorities are pushing for an increase in scrap export duties to EUR 290/t for the same purposes
 
• On the demand side, the Russian Steel association expects Russia’s domestic steel demand to fall 30% YoY in 2022. However, it might be supported by the launch of new infrastructure projects. So far we see April volumes declining at a modest 10-15%
 
• Among Russian steel producers, NLMK is best positioned given its exports are mostly semi-finished and are exempt from sanctions. Meanwhile 90% of Severstal exports face disruptions due to sanctions
 
#steel #rusteel #coking_coal

⛏Steelmaking margins declined globally due to the increase in raw materials prices
 
• Chinese steel producers’ margins fell 10% through March, mostly driven by 22% growth of the raw materials basket price. At the same time, HRC China FOB rose 8% in March, which might be partially caused by the negative effect of China’s COVID-19 restrictions on production
 
• Domestic demand for steel in the country was negatively affected by COVID-19-related disruptions: new property sales in China’s key cities fell 47% YoY in March after China's property sales declined 10% YoY in 2mo22
 
• EU steel prices, meanwhile, rose more than 70% over the course of the month to USD 1,582/t, supported by supply issues amid geopolitics and rising energy costs. This led to more than 160% growth of EU HRC premium to HRC Black Sea FOB (USD 667/t) and to more than a 120% increase in the premium to HRC China FOB (USD 682/t). US steel prices were up 30% during the period
 
#steel

📌China’s domestic excavator sales declined 48% YoY in January and 31% YoY in February
•Meanwhile, the country's total excavator sales (domestic + export) fell 20% YoY in January and 14% YoY in February
❗️The decline in excavator sales might indicate weakening construction activity, which could negatively affect China’s demand for industrial metals

#steel #copper #aluminium

📌Peru’s copper output was roughly flat YoY in February
•Meanwhile, in January, the country’s copper production increased 13% YoY
❗️However, we note risks to Peru’s copper output in the coming months due to protests at the Las Bambas copper mine (1.7% of global copper supply)
📝Chile’s copper output was down 7% YoY in February

#copper

📌China’s authorities might introduce policy measures to stimulate domestic consumption amid COVID-19 lockdowns
•According to Bloomberg, the interest rate on one-year policy loans might be reduced next week
•Moreover, the PBoC plans to set up a stability fund to provide support to troubled financial firms
❗️The stimulus measures might support the country’s economic activity and, hence, the demand for metals
📝In March, China’s Caixin manufacturing PMI fell to 48.1, which indicates weakening manufacturing sector growth. This is a negative sign for MSCI EMEA materials

#China #global

📌Gold-backed ETFs increased their holdings through March, with net inflows at 185t
• The net inflows rose from 35t in February
❗️Strong investment demand for gold might support gold prices

#ETF #gold

🔗 Why Russian steelmakers look interesting 
  
🌏 As we noted previously, Russian steelmakers, faced with EU sanctions, have good opportunities to redirect 'missing volumes' to other countries. Further, finished steel export volumes to 'unfriendly jurisdictions' are, apart from for Severstal, a modest share in their sales portfolios 
 
❗️NLMK and MMK are the 2 most interesting companies in the space, in our view. As slabs constitute the majority of NLMK’s exports, we believe these volumes are secure (so far). MMK has the strongest domestic exposure, which exempts the company’s sales from the direct impact of sanctions 
 
💰At spot prices, the companies’ trading multiples and yields look lucrative: NLMK offers a 31% FCF yield, trading at 2.3x 1-y fwd EV/EBITDA, while MMK remains the cheapest name among the big Russian steelmakers, at 1.2x spot EV/EBITDA and a 35% FCF yield 
 
❓We see the risks being tightening price regulation in Russia and restrictions on semis exports to 'unfriendly countries'

🔗 Ashinsky -- a name you’ve probably never heard of 
 
📝 Ashinsky Metallurgical plant (AMEZ) is a small Russian steelmaker with 0.5mnt/a of thick plate EAF production. The company predominantly sells its products domestically, with export to the EU and CIS being only a bit over 10% of its production in 2021
 
🙉 Given AMEZ’s size and low profile, we expect it to be able to fly under western regulatory radar. Furthermore, the current Russian regulatory stance is beneficial for the company due to a fixed HRC price and pressure on scrap prices. On the other note, AMEZ has lowest carbon footprint among Russian steelmakers as it is 100% EAF producer
 
💰 With the current cash flow run-rate, the company will have a net cash balance sheet position roughly equal to its current market cap by YE22. The company has the lowest valuation and the highest FCF yield in the Russian steel space, we estimate. Higher than average operational leverage also positions AMEZ nicely in the current environment of high steel prices

📌CISA mills’ daily crude steel output increased 5.4% in the last ten days of March, compared with the second ten days of the month 
• However, this was 2.3% YoY lower 
• Meanwhile, CISA mills’ finished steel inventories decreased 2.9% through the period (up 13% YoY) 
• We note that in early April, China’s crude steel output might be supported by the lifting of the COVID-19 lockdown in Tangshan (14% of China’s steel production) 
❗️This, coupled with the country's plummeting property sales, might negatively affect steel prices 

#steel

📌Preliminary data suggests a 20% YoY decline in new car registrations in France, the UK, Spain, Italy and Germany in March 
• In France and Germany, car sales decreased 20% YoY and 17% YoY, respectively 
• Car registrations in Spain and Italy both fell 30% YoY 
• Meanwhile, UK vehicle sales were down 14% YoY 
❗️Given these 5 countries accounted for 70% of total new vehicle sales in Europe in 2021, this implies a significant YoY drop in EU and UK new car registrations in March 
📝The full results for March registrations are to be published on 20 April 
 
#cars

📌The UK plans to build 8 new nuclear reactors by 2030, according to the country’s new energy security strategy 
• The strategy implies that the UK will increase its nuclear power capacity to 24GW in 2050 from 9GW in 2021 
❗️Given the increase is equivalent to 4% of current global nuclear power capacity, a successful enaction of the plan would support demand for uranium in the long term 
 
#uranium

💎 Alrosa SDN inclusion – what does it mean for global markets and who benefits? 
  
📌 Yesterday, the US included Alrosa onto its SDN list. All operations with the company should be halted within 1 month 
 
❗️Alrosa is one of 2 major diamond producers in the world, with almost a 30% share in the global rough diamond market. As further Alrosa supply is at risk, we expect strong, 30-50% upward pressure on rough diamond prices in the coming quarters amid robust midstream demand 
 
💰 The main beneficiary of rough diamonds price growth would be Petra – a small cap company, mining diamonds mostly in South Africa and Tanzania, and running the Cullinan mine, known for its rare blue diamonds. Assuming 30-50% price growth, Petra would be trading at 0.2x EV/EBITDA, offering 80-100% FCF yield at such prices.

📌How to hedge geopolitical risks with gold miners
 
·As we noted earlier, geopolitical uncertainty has driven capital into gold ETFs, which has already resulted in a 5% increase of the gold price. We believe gold stocks provide a good hedge against inflation and the declining trustworthiness of fiat currencies.
 
⛏ Picking stocks, we want to draw attention to four goldminers in particular: Newmont (the highest growth, but the most expensive), Barrick Gold (no growth but 20% cheaper), Newcrest (the cheapest of the big boys) and Polyus (2x lower cash costs than the rest).
 
💰 We see Newcrest as the most interesting, trading at 4.2x 1-y fwd EV/EBITDA (vs. hist. 6x EV/EBITDA and 7-9x for its peers) and offering a ~10% FCF yield (2x its peers). It was penalised by investors for operational underperformance, but this has been more than priced-in already, in our view

#gold $NCM $NEM $GOLD