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Leading Independent Investment Research

Morningstar, Inc.

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Equity Bottom-Up

Temporary tightness should abate as demand falters and supply surges.<ul><li class="p1">Iron ore prices have surged to $69 per tonne, up 23% from last week and continuing their recent upward trend from a bottom of $37 per tonne in December.</li><li class="p1">Leveraged mining stocks are also up by double-digit levels this week, having already more than doubled since February.</li><li class="p1">We think this rally is unsustainable, as it is based on short-lived demand measures and near-term supply disruptions.</li><li class="p1">As temporary tightness in the market abates, iron ore prices should fall by more than half to $30 per tonne in the long term, driven by falling Chinese steel demand and rising scrap availability.</li></ul>Analysts: David Wang, Daniel Rohr and Mathew Hodge

Temporary tightness should abate as demand falters and supply surges.Iron ore prices have surged to $69 per tonne, up 23% from last week and continuing their recent upward trend from a bottom of $37 per tonne in December.Leveraged mining stocks are also up by double-digit levels this week, having already more than doubled since February.We think this rally is unsustainable, as it is based on short-lived demand measures and near-term supply disruptions.As temporary tightness in the market abates, iron ore prices should fall by more than half to $30 per tonne in the long term, driven by falling Chinese steel demand and rising scrap availability.Analysts: David Wang, Daniel Rohr and Mathew Hodge

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Kelusa Asia Focus Funds

Angang Steel Co Ltd (H) / Equity Bottom-Up

I want to quickly grab your attention with one chart forking my previous insight. We are seeing the supply response from China.  This SEAG chart shows you Chinese steel supply side response is going into overdrive. The red line is the response to TSF.  It just proves that steel is just a play on that and that structurally nothing has changed. China produced 70.6 million tons for March up 16.6% month on month. The highest month on month increase since i've looked at steel in China since 2007.<figure class="editor-figure"><img src="https://static-prod.smartkarma.com/images/media/000/007/404/original/Chinasteelresponse.png?1461199639" class="editor-image img-responsive" data-smartkarma-image-id="7404"></figure> …

I want to quickly grab your attention with one chart forking my previous insight. We are seeing the supply response from China.  This SEAG chart shows you Chinese steel supply side response is going into overdrive. The red line is the response to TSF.  It just proves that steel is just a play on that and that structurally nothing has changed. China produced 70.6 million tons for March up 16.6% month on month. The highest month on month increase since i've looked at steel in China since 2007. …

China Steel the Start of the Supply Response !!!

Thematic (Sector/Industry)

<ul><li class="p1">The recent rally in bulk commodity miners will end in tears.</li><li class="p1">Iron ore has risen to $60 per tonne from a bottom of $37 in December, with leveraged mining stocks more than doubling from recent lows.</li><li class="p1">We expect falling Chinese steel demand and rising Chinese steel scrap availability to cut iron ore prices by half.</li><li class="p1">Shares of several heavily indebted producers are likely to fall by more than 50%.</li><li class="p1">Our long-run forecasts are $30 per tonne for iron ore (versus consensus $55) and $75 per tonne for metallurgical coal (versus consensus $110).</li></ul>Analysts: David Wang, Daniel Rohr, Mathew Hodge &amp; Andrew Lane

The recent rally in bulk commodity miners will end in tears.Iron ore has risen to $60 per tonne from a bottom of $37 in December, with leveraged mining stocks more than doubling from recent lows.We expect falling Chinese steel demand and rising Chinese steel scrap availability to cut iron ore prices by half.Shares of several heavily indebted producers are likely to fall by more than 50%.Our long-run forecasts are $30 per tonne for iron ore (versus consensus $55) and $75 per tonne for metallurgical coal (versus consensus $110).Analysts: David Wang, Daniel Rohr, Mathew Hodge &amp; Andrew Lane

Dawn of the Scrap Age: Iron Ore and Met Coal Will Suffer as China's Scrap Supply Rises.

Global Head of Research, Smartkarma

Mark Artherton

Global Head of Research

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
​
More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Macroeconomics

<div class="content-highlight"><ul>
<li>Every time the Chinese authorities try to wean the economy off monetary stimulus they are forced back into an ever diminishing cycle.  2015 is no exception.</li>
<li>The latest data releases support the view of a stimulus led recovery in China.  Kicking the 'reform' can down the road for a little while.</li>
<li>Unfortunately the impulse value of each stimulus is diminishing.</li>
<li>Due to the precipitous declines in commodities markets prior to this round of stimulus the commodities markets will behave differently from…</li>
</ul></div>


Every time the Chinese authorities try to wean the economy off monetary stimulus they are forced back into an ever diminishing cycle.  2015 is no exception.
The latest data releases support the view of a stimulus led recovery in China.  Kicking the 'reform' can down the road for a little while.
Unfortunately the impulse value of each stimulus is diminishing.
Due to the precipitous declines in commodities markets prior to this round of stimulus the commodities markets will behave differently from…


Angang’s profit warning that its first-quarter 2016 net loss will be CNY 615 million is disappointing, especially as steel product prices moved higher over the past quarter.The company indicated that the drop in fuel costs has lagged the decline in steel prices, leading to a margin squeeze.Analysts: Philip Zhong &amp; Chokwai Lee

Angang’s profit warning that its first-quarter 2016 net loss will be CNY 615 million is disappointing, especially as steel product prices moved higher over the past quarter.The company indicated that the drop in fuel costs has lagged the decline in steel prices, leading to a margin squeeze.Analysts: Philip Zhong &amp; Chokwai Lee

Angang Steel's Profit Warning Is Disappointing; Company Unable to Benefit From Higher Prices

China

Angang Steel Company Limited produces steel products which include cold rolled sheets, steel rail, pipe billets, wire rods, thick plates, and other steel products.

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Angang Steel Co Ltd (H) (347 HK)

Iron Ore Rally Unsustainable

Temporary tightness should abate as demand falters and supply surges. Iron ore prices have surged to $69 per tonne, up 23% from last week and...

Morningstar, Inc.

China Steel the Start of the Supply Response !!!

I want to quickly grab your attention with one chart forking my previous insight. We are seeing the supply response from China. This SEAG chart...

Sameer Taneja

Dawn of the Scrap Age: Iron Ore and Met Coal Will Suffer as China's Scrap Supply Rises.

The recent rally in bulk commodity miners will end in tears. Iron ore has risen to $60 per tonne from a bottom of $37 in December, with leveraged...

Morningstar, Inc.

China - Late 2012-Early 2013 Repeat

Every time the Chinese authorities try to wean the economy off monetary stimulus they are forced back into an ever diminishing cycle. 2015 is no...

Mark Artherton

Angang Steel's Profit Warning Is Disappointing; Company Unable to Benefit From Higher Prices

Angang’s profit warning that its first-quarter 2016 net loss will be CNY 615 million is disappointing, especially as steel product prices moved...

Morningstar, Inc.

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