Steel prices defy global chaos; sponge iron at 3-yr high

Motilal Oswal has come out with its report on metal space.

• Steel prices in major geographies continued their decline with China (down 4% WoW), Europe (down 0.5% WoW) and the Middle East (down 1.7% WoW). Prices were flat in North America, Turkey and Russia. However Indian long steel prices increased 3-6% WoW and flat product prices rose 0-1% WoW. Sponge iron prices increased 2.6% WoW to INR23,700/t reaching a three-year high and pig iron prices were down 1.1% WoW at INR24,479.
• Chinese spot iron ore CIF prices decreased sharply, falling 6% WoW to USD165/t (down USD33 from their peak in February 2011) with similar cuts (down 5-8% WoW) in iron swaps. Richard Bay thermal coal prices declined 1.6% WoW to USD112/t.
• 4QFY12 charge chrome settlement rolled over at USD1.20 per pound. Despite the rand's favorable movement, South African producers were plagued by high power costs. However, the worsening economic scenario in Europe prevented a hike in contracts by European stainless steel mills.
• NMDC raised prices of fines sold from Bailadila complex (Chhattisgarh) by 17% to INR3,380/ton for the December quarter as the local iron-ore market remains tight. It also increased prices of lumps by 7-8%. Thus 3QFY12 average contract prices are expected to increase by 14-15% QoQ to ~INR4,600 (v/s our earlier estimate of INR3,900). Fines constitute ~60% of total volumes.
• Rio Tinto plans a major retreat from the aluminum business as it plans to sell 13 assets, including smelters and alumina refineries in Australia, New Zealand, France, Germany, the US and the UK.

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