Lack of demand weighing on metal prices: Emkay
Emkay Global Financial Services has come out with its report on metals sector. The research firm believes that, uncertainty and concerns over global macroeconomic health would keep metals prices volatile.
April 02, 2013 / 16:56 IST
Emkay Global Financial Services has come out with its report on metals sector. The research firm believes that, uncertainty and concerns over global macroeconomic health would keep metals prices volatile.
Steel prices remained weak across the geographies during the last fortnight (ending 28th March) as worries on Chinese demand continue to linger. Prices of iron ore however were more stable and saw some pull back. Don't expect any strong recovery in steel or iron ore prices in the short-medium term. Base metals prices eased further during the period on stronger USD and concerns over Cyprus. Believe base metals prices to remain stable…Ferrous: steel prices remain weak; iron ore recovers slightlySteel prices remained weak across different markets. The CIS Black Sea (fob) export HRC prices declined 2.6 percent to USD 565/ tonne. Chinese domestic prices also fell by 0.5 percent to USD 618/tonne. In India, poor demand seems forcing companies to offer discounts to the customersIron ore prices saw some pull- back during last fortnight with 62 percent Fe grade prices gaining 3 percent to USD 137/ tonne while 58 percent Fe grade ore prices remained unchanged at USD 127/ tonneWorld crude steel production for the month of February was reported at 123.3 mt, up 1.2 percent YoY and down 1.2 percent MoM. Capacity utilizations however rose to 80.5 percent (up 380 bps MoM and 80 bps YoY). Chinese steel production rose 4 percent MoM and ~10 percent YoY to 61.8 mt with a daily run rate of 2.2 mt Non-ferrous: weakness continuesStronger USD index (up1 percent over fortnight) and concerns over Cyprus weighed on bas e metals forcing prices to fall. Zinc and Lead have lost 4 percent and 6 percent respectively during the last fortnight to finish at USD 1871/ tonne and USD 2094/ tonne. Copper and aluminium on the other hand fell 2 percent and 3 percent respectively to USD 7583/ tonne and USD 1882/ tonne.On the inventory front, copper and aluminium inventory rose 9 percent and 1 percent respectively while, zinc and lead inventory fell by 3 percent and 6 percent respectively during the fortnight Macroeconomics: broadly weakEconomic data released during the last fortnight across the world show broad weakness in most of the parameters along with concerns over Cyprus debt issues. Manufacturing PMI in US, Euro Zone and Japan fell substantially for the month of March. Chinese manufacturing PMI though improved on MoM basis, it was lower than the flash data. Industrial production in US though increased by 0.7 percent, Japan saw a contraction in the same. UK GDP contracted by 0.3 percent, while US GDP growth dropped to 0.4 percent in Q4CY12. In India, meanwhile, the RBI, as expected cut the Repo rate by 25 bps to 7.5 percent, however, with indications that there could be a longer pause in further cuts. Current account deficit on the other hand rose to a record 6.7 percent of GDP in Q3FY13. Believe uncertainty and concerns over global macroeconomic health would keep metals prices volatile.Trend: Ferrous metalsSteel prices continued to fall over the past fortnight. While the China HR Sheet price declined by 0.5 percent to USD 618/tonne, the benchmark CIS Black Sea (fob) Export prices declined 2.6 percent to end at USD 565/tonne. In India also, poor demand is weighing on the prices, as the steel companies have been trying to give discounts to the customers to increase sales volume.Iron ore prices during the last fortnight saw some stabilization as the 62 percent Fe grade ore rose 3 percent to USD 137/ tonne while 58 percent grade iron ore remained unchanged at USD 127/tonne. The China domestic coking coal prices meanwhile declined further by 3 percent to close at USD 246/tonne.Trend: Non-ferrous metalsBase metal prices maintained weak trend and fell further during the last fortnight. Copper aluminium , zinc and lead declined 2 percent, 3 percent, 4 percent and 6 percent respectively to close at USD 7583/tonne, USD 1882/tonne, USD 21871/tonne and USD 2094/ tonne. Inventory trend was mixed. Aluminium inventory remained stable at 5.2 mt, while copper inventory rose by 9 percent to 0.57 mt. Zinc and lead inventories fell by 3 percent and 6 percent respectively to 0.12 mt and 0.26 mt during the past fortnight.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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