Posts Tagged Steel
Dry Bulk Weekly – September 6, 2010
Posted by Belisarius in China, Commodities, Dry Bulk Weekly on September 6, 2010
Baltic dry index rose 6.0% last week; Capesize Index was up 14.1%; Panamax Index rose 4.8%; Supramax and Handysize Indexes lost 5.5% and 1.2% respectively.
China steel prices ticking up, bringing some demand to the shipping markets.
Chart 1. Baltic Dry Indexes Relative Performance
Source: Bloomberg
Chart 2. Baltic Dry Index
Source: Bloomberg
Chart 3. Baltic Dry Index Components
Source: Bloomberg
Chart 4. China Iron Ore Price Fines CFR Main China Port
Source: Bloomberg
Chart 5. China Domestic Hot Rolled Steel Sheet Spot Average Price
Monthly Strategy – September 2010
Posted by Belisarius in Monthly Strategy on September 3, 2010
Equities
Economic data released in recent month or so is on a absolute and relative basis weak. The difference from July is that the consensus has moved downwards, so the markets focuses on comparing actual data with consensus and disregarding absolute levels.
But we are here to earn some money, not waste our time on lamenting whether someone (in this case consensus) is right or not.
Economic data released in recent month points to only marginal and slowing growth. Consumer demand proxies point to deceasing level of consumer demand. Unemployment is high and it is not falling. The government stimulus is wearing off.
Dry Bulk Weekly – August 30, 2010
Posted by Belisarius in Commodities, Dry Bulk Weekly on August 30, 2010
Baltic dry index fell 1.6% last week; Capesize Index fell 3.6%; Panamax Index fell also 3.6%; Supramax and Handysize Indexes gained 1.6% and 1.0% respectively.
I added 3 new charts below. Iron ore and steel inventory (5 cities only, but I think it should work as a proxy) and iron ore price. The fundamentals are unchanged, high iron ore price doesn’t warrant steel mills positive margins. Inventory of both iron ore and steel is high.
Chart 1. Baltic Dry Indexes Relative Performance
Monthly Strategy – August 2010
Posted by Belisarius in Monthly Strategy on August 2, 2010
Equities
Economic data released in recent month or so is dominated by bellow consensus readings and on absolute level pointing to only marginal and slowing growth. Consumer demand proxies point to deceasing level of consumer demand. Unemployment is high and it is not falling. The government stimulus is wearing off.
But the market is rising despite all of that and contrary to my (correct) macro calls.
I still believe that the market is overvalued; I believe that there is disconnect in what equity and bond markets are pricing – with equity being wrong; I believe we will correct to sub 900 level in the S&P 500.
Baltic Dry Index At 1709, Down 4.5%
Posted by Belisarius in China, Commodities, Markets on July 14, 2010
As I wrote in Dry Bulk Weekly it appears that Chinese removal of steel export tax rebates is a complete game changer for the industry. The slowdown in Chinese iron ore imports is easing port congestion which tied approximately 20% of the world fleet a few weeks ago. The port congestion has since then eased by a third. New-building deliveries were also strong in the first half of the year. All this has change the dry bulk demand/supply balance really fast. It’s hard to imagine a recovery in rates with this kind of fundamentals setup.
Chart 1. Baltic Dry Index
Dry Bulk Weekly – July 11, 2010
Posted by Belisarius in China, Commodities, Dry Bulk Weekly on July 11, 2010
Baltic dry index fell 16.6% last week; The hardest hit were Panamaxes with 20.6% loss; Capesizes lost 20.0% ; Handysizes and Supramaxes lost 10.3% and 8.9%.
Chinese tax rebates on hot-rolled coil and some cold-rolled coil and galvanized products will be removed starting July 15. This makes Chinese steel exports uncompetitive and it is moving the markets. Chinese steel mils now have to choose whether to reduce capacity and cost or go bankrupt.
Both steel and iron ore prices are falling due to the removal of tax rebates. Forward steel curve for some steel grades in China has moved to backwardation (spot prices higher than future prices). So, I suppose they have to liquidate inventory (and they have plenty of it) at fire-sale prices.
Chinese Steel Mills To Default On Quarterly Iron Ore Contracts
Posted by Belisarius in China, Commodities on July 6, 2010
From Metal Bulletin: Quarterly, spot or swap — which iron ore contract to choose?
Tom Albanese’s admission that Rio Tinto may abandon quarterly iron ore pricing, should the majority of steel mills default to the spot market, could benefit the emerging market for over-the-counter iron ore swaps.
Macquarie Research believes third quarter contract prices will be higher than spot prices as soon as July. (MB Jun 30)
If this is right, steelmakers will be sorely tempted to abandon quarterly contracts very soon after their inception.
Dry Bulk Weekly – July 4, 2010
Posted by Belisarius in Commodities, Dry Bulk Weekly, Markets on July 4, 2010
Baltic dry index fell 8.8% last week; The hardest hit were Panamaxes with 19.6% loss; Supramaxes lost 6.0% ; Handysizes and Capesizes lost 5.4% and 3.3% .
It looks like the Baltic Dry Index was not bottoming last week after all. Panamaxes which were more stable sector than the Capsize sector played catchup and collapsed. That was not the case in the corrections during the last year or so, do we could have different kind of weakness this time.
The available shipping capacity is piling up and according to broker views we could see further losses. Analyst reports on the other hand argue that we are seeing Chinese steel mills cutting capacity as falling steel prices have squeezed profit margins bringing a temporary slowdown in demand.
Monthly Strategy – July 2010
Posted by Belisarius in Monthly Strategy on July 3, 2010
Almost unchanged from June.
Equities
Only extremely favorable economic data could change the negative trend established. This is highly unlikely. So I would say we will soon see S&P 500 at 875.
On a macro level, the stimulus is wearing off, politicians and central bankers are not ready to continue with loose fiscal an monetary policies, just the opposite, austerity is the game. For now.
Private demand is weak. Private investments also show no strength. Real-estate is burdened with unsustainable debt levels, still to high prices and weak demand. Without real-estate investment recovery, we cannot talk on sustainable and historically high economic growth rates.
China Scaling Back Steel Capacity Additions
Posted by Belisarius in China, Commodities on June 28, 2010
Bloomberg story: Baosteel Scales Back Expansion Target by 38% as China Seeks Capacity Curbs.
China, the biggest steelmaking nation, has pulled back from encouraging mills to get as large as global leader ArcelorMittal as it sought to shutter old plants, curb pollution and power demand. Chinese steelmakers are likely to cut output in the third quarter because of weak demand, Baosteel said this month.
“The world economic recovery path will be bumpy, unpredictable and long,” Baosteel said in its statement today. “China’s economic restructuring will bring uncertainties during the 2010 and 2015 period.”
Belisarius Recommends
