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

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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