Metals review: Ferrous soften, Non-ferrous steady

Emkay Global Financial Services has come out with its report on metal space.

Ferrous prices continued to soften during the last fortnight (ending July 03) as CIS Black Sea (fob) export prices declined sharply. Coking coal prices and HRC prices too softened during the period. Non-ferrous metals remained fairly stable with only copper LME showing significant strength. Uncertainty on global economic scenario continues to linger with all eyes on the European Central Bank meet and the monetary policy announcements scheduled later this week. In the raw material space, the gap between prices of 63% and 62% iron ore grades widened, as 63% grade prices improved significantly, whereas 62% iron grades remained stable.

Ferrous- Price continue to soften:

• Another fortnight passed witnessing the similar trend of falling global steel prices on the back of bleak demand and higher output. The CIS Black Sea (fob) export prices declined sharply by 5% during the fortnight to US$550/ tonne. North America and European domestic HR coil prices also fell 7% and 1% respectively during the last fortnight to US$590/ tonne and €512/ tonne respectively. Weak INR helped Indian prices to remain steady.
• Reversing the trend of the previous fortnight, the gap between 63% Fe grade ore and 62% Fe grade ore widened during the fortnight as 63% grade ore gained 4% to close at US$141.5/tonne while 62% grade ore remained stable at US$135.4/tonne. 58% Fe grade ore declined moderately by 1.5% to US$ 120.9/tonne

Non-ferrous- Copper firms up; aluminium and zinc steady:

• After recovering marginally in the last fortnight, the base metal prices remained stable during the fortnight except for copper which recovered another 3% and closed at US$7777/tonne and lead which dropped marginally by 1% to US$1901/tonne.
• With the Aluminium LME in the similar zone as in last fortnight, the aluminium producers are still facing the cost pressure. The aluminium LME stood at US$1911/ tonne. There was a sign of marginal drop in Aluminium inventory to 4.81 mt (4.84 mt during the last fortnight), while there was a sharp increase of 5% in Zinc inventory to 0.99 mt.
• Aluminium, Zinc and lead LMEs were fairly stable at US$1911/tonne and US$1905/tonne and $1901/tonne respectively.

News / Events:

• The EGMs of Sesa Goa and Sterlite Industries were held on 19th and 21st June respectively. A report released on 25th June revealed that 79% of Sesa shareholders and 89% of Sterlite shareholders had voted in favour of the deal. This was seen as a possible bottleneck as some of the large investors in Sesa had been voicing concern against the same.
• During the fortnight, Hindalco reported its consolidated numbers. A dividend of Rs 1.55 per share has been proposed. Hindalco announced its plan to double the size of its Aditya Aluminium smelter project from 0.36mtpa to 0.72mtpa and also plans to raise Rs 90bn for its various project
• JSW Steel redeemed its FCCBs worth $274million at 142.8% of the principal amount, aggregating to $391.8m (Rs2247 crore) on 28th June. With full payment, no equity dilution took place else 11.6m shares would have to be issued. The FCCBs were issued in 2007 to fund the expansion at its Vijayanagar (at Bellary in Karnataka) project.
• Iron ore mining likely to resume by mid August in about 15 mines at Bellary (Karnataka) once their R&R plans are approved by the Central Empowered Committee. Mining ban had been imposed in the state a year back (with NMDC only allowed to mine @1mtpa) and the old stock at various mines being sold only through auctions, adversely affecting iron ore supplies in the region.

Institutional holding more than 40% in Indian cos   

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