Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Thematic (Sector/Industry)

<h2>Demand</h2>
<ul>
<li>Steel production is trending upwards in major geographies. For August, Chinese steel production was up 8.4% YoY to 94.9 million tons. China continues to be a significant proportion of global steel production (62% in July), and we forecast that for August, this will continue to be the case. Indian mills like SAIL and JSPL are 35% YoY growth in production in August. This signals that demand in India is coming back quite strongly.</li>
<li>Steel mill margins are trending downwards. Cash margins were down 26 RMB/ton WoW, from 119 RMB/ton to 93 RMB/ton. If margins collapse to breakeven, iron ore may experience some near-term pressure. With the increase in liquidity and bond issuances, we see this being less likely.</li>
</ul>
<h2>Supply</h2>
<ul>
<li>Iron ore at the ports increased 0.9 million tons to 108.1 million tons WoW. Port inventories, in terms of consumption days, are close to their historical five-year lows of 25 days due to the increase in pig iron production. Port Inventories have risen for 5 weeks in a row.</li>
</ul>

Demand

Steel production is trending upwards in major geographies. For August, Chinese steel production was up 8.4% YoY to 94.9 million tons. China continues to be a significant proportion of global steel production (62% in July), and we forecast that for August, this will continue to be the case. Indian mills like SAIL and JSPL are 35% YoY growth in production in August. This signals that demand in India is coming back quite strongly.
Steel mill margins are trending downwards. Cash margins were down 26 RMB/ton WoW, from 119 RMB/ton to 93 RMB/ton. If margins collapse to breakeven, iron ore may experience some near-term pressure. With the increase in liquidity and bond issuances, we see this being less likely.

Supply

Iron ore at the ports increased 0.9 million tons to 108.1 million tons WoW. Port inventories, in terms of consumption days, are close to their historical five-year lows of 25 days due to the increase in pig iron production. Port Inventories have risen for 5 weeks in a row.


Core Correlations: Iron Ore Research Weekly - September 21st, 2020

Investment Strategist, CEO, Hokkaido Asset Management

Benjamin Pedley

Investment Strategist, CEO

Hokkaido Asset Management

<p>When it comes to stock themes it helps to have a simple story that makes sense to investors both experienced and new, and that’s why the nascent rally in Australian cobalt stocks is so compelling and looks to have a long, long way to run due to a structural supply shortage.</p><p> You see cobalt, not a well-known metal outside of those in the mining industry, is typically the by-product of mining nickel and is a key component of new generation batteries that are being used to power electric vehicles (EVs). When you think battery technology you must think of cobalt.</p><p>Indeed, according to the US Geological Survey much of the demand for cobalt, roughly 49%, is driven by batteries in cellphones and <a href="https://www.theguardian.com/environment/2017/jul/29/electric-cars-battery-manufacturing-cobalt-mining" target="_blank">increasingly self-driving cars</a>. As evidence of this, <a href="https://www.reuters.com/article/us-volkswagen-cobalt-evs-exclusive/exclusive-vw-moves-to-secure-cobalt-supplies-in-shift-to-electric-cars-idUSKCN1BX1RE" target="_blank">Volkswagen in September put out a tender</a> for a direct cobalt supplier for ten years from 2019. That makes it one of the largest procurement projects in the automotive industry, VW said, signaling a US$24 billion shift to electric vehicles.</p>

When it comes to stock themes it helps to have a simple story that makes sense to investors both experienced and new, and that’s why the nascent rally in Australian cobalt stocks is so compelling and looks to have a long, long way to run due to a structural supply shortage. You see cobalt, not a well-known metal outside of those in the mining industry, is typically the by-product of mining nickel and is a key component of new generation batteries that are being used to power electric vehicles (EVs). When you think battery technology you must think of cobalt.Indeed, according to the US Geological Survey much of the demand for cobalt, roughly 49%, is driven by batteries in cellphones and increasingly self-driving cars. As evidence of this, Volkswagen in September put out a tender for a direct cobalt supplier for ten years from 2019. That makes it one of the largest procurement projects in the automotive industry, VW said, signaling a US$24 billion shift to electric vehicles.

EV Batteries Power Up Cobalt Small Caps Down Under

Australia

Atlantic Ltd provides minerals resource mining services. The Company offers iron ore mining, geological studies, and resource exploration services. Atlantic serves customers in Australia.

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Atlantic Ltd (ATI AU)

Core Correlations: Iron Ore Research Weekly - September 21st, 2020

Demand

Sameer Taneja

EV Batteries Power Up Cobalt Small Caps Down Under

When it comes to stock themes it helps to have a simple story that makes sense to investors both experienced and new, and that’s why the nascent...

Benjamin Pedley

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