Metal: Cost push helped steel prices to gain, Emkay

Emkay Global Financial Services has come out with its report on metal sector. According to the research firm steel prices rose along with iron ore prices.

During the last fortnight (ending 14th Jan’13) steel prices saw a good jump after a long consolidation. Believe, this improvement is due to cost push rather than demand pull, as iron ore prices continued to soar. We would like to wait and watch whether steel prices can sustain their recent gains. Base metals on the other hand remained quiet and ended flat on a fortnightly basis. Believe, USD index would play a major role in deciding the price direction in the near term…

Ferrous- Steel prices rose along with iron ore prices:

• Steel prices in most of the geographies saw decent gains mainly due to cost push, as iron ore prices kept rising. The CIS Black Sea (fob) export HRC prices gained 9% to US$580/ tonne. Domestic prices in China rose by 3.3% during the same period to US$652/tonne. In India long product prices saw some improvement, while flat product prices remained steady 
• Iron ore prices continued their upward movement on due to higher imports from China, as port inventory fell recently towards 72 mt. The 62% and 58% Fe grade iron ore prices jumped 7% and 8% to US$154.6/tonne and US$145.7/tonne respectively.

Non-ferrous- Flat prices:

• Base metal prices remained fairly stable during the last fortnight, as USD index remained stable at 79.5 and most of the positives already are factored in
• Copper and aluminium gained 1% each to US$8030/tonne and US$2063/tonne respectively while zinc and lead LME lost 2% and 1% to close at US$1996/tonne and US$2305/tonne respectively

Trend- Ferrous metals:

Global steel prices gained sharply during the last fortnight. While the China HR Sheet price gained 3.3% to US$652/tonne, the benchmark CIS Black Sea (fob) Export prices gained 9% to end at US$580/tonne. We believe this rise is mainly due to cost push rather than demand pull and also on some possible restocking. In India, long product prices saw some improvement recently. Along with slight improvement in construction activities, this could also be due to closure of several sponge iron units in various parts of the country. On the raw material side, iron ore prices continued their dream run on higher imports from China, as the port inventory recently fell towards 72 mt. The 62% and 58% grades of iron ore further gained 7% and 8% during the fortnight to US$154.6/tonne and US$145.7/tonne respectively. The China domestic coking coal prices also rose 4% to close at US$283/tonne.

Trend- Non-ferrous metals:

Unlike the previous fortnight’s negative trend, base metals prices on LME remained relatively stable over the last fortnight. While copper and aluminium gained 1% each to close at US$8030/tonne and US$2063/tonne respectively, zinc and lead lost 2% and 1% to close at US$1996/tonne and US$2305/tonne respectively. Copper LME inventory rose again by 3% during the fortnight to 0.33 mt, aluminium and zinc inventory remained stable at 5.2 mt and 0.3 mt respectively and lead inventory fell 6% to 0.30 mt. Interestingly, copper prices didn’t see any rise after the proposed ETF by JP Morgan got the nod from the US SEC.

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