📌Secondary market rough diamond prices declined 10-40% in recent weeks
• Prices of large stones fell 10%, while the prices of smaller diamond categories decreased 40%
❗️In the last few months, secondary market prices rose more significantly than the contract prices of Alrosa and De Beers, which led to the secondary market price correction.
• Prices of large stones fell 10%, while the prices of smaller diamond categories decreased 40%
❗️In the last few months, secondary market prices rose more significantly than the contract prices of Alrosa and De Beers, which led to the secondary market price correction.
⛏ArcelorMittal partially suspended operations at some of its steel mills in Spain
• This was caused by lack of raw materials supplies on the back of truck drivers protests
• The affected steel mills produce about 2% of EU crude steel output
• Previously, the company had already reduced output at some of its EAFs in Spain due to rising energy costs
❗️This might support EU steel prices, especially given that further steel output reductions are possible
• This was caused by lack of raw materials supplies on the back of truck drivers protests
• The affected steel mills produce about 2% of EU crude steel output
• Previously, the company had already reduced output at some of its EAFs in Spain due to rising energy costs
❗️This might support EU steel prices, especially given that further steel output reductions are possible
📌 China’s National Coal Association (CNCA) expects the country's 2022 coal production to increase moderately
• However, CNCA did not provide any exact estimates
• In 2021, China’s authorities approved new coal capacity of 300mnt/a (8% of annual production)
❗️This, coupled with China’s coal price regulations might pressure coal prices
• However, CNCA did not provide any exact estimates
• In 2021, China’s authorities approved new coal capacity of 300mnt/a (8% of annual production)
❗️This, coupled with China’s coal price regulations might pressure coal prices
📌Why will Russian steelmakers quickly restore capacity utilization to 100%?
❗️Russian steelmakers are in the top 10% of the most efficient producers: their integrated cash costs are at USD 230-380/t, which is 2x lower than the global average and 3x lower than in the US or Europe.
• At the same time, steel prices reached USD 895/t in China (HRC FOB) and USD 1,600/t in Europe (EU HRC). Even with increased delivery costs, exports of steel will remain profitable for Russian steel producers
📝Even during the global financial crisis in 2009, when global steel production fell by 8% YoY, Russian steelmakers restored their capacity utilization up to 100% in just two quarters
#steel #rusteel
❗️Russian steelmakers are in the top 10% of the most efficient producers: their integrated cash costs are at USD 230-380/t, which is 2x lower than the global average and 3x lower than in the US or Europe.
• At the same time, steel prices reached USD 895/t in China (HRC FOB) and USD 1,600/t in Europe (EU HRC). Even with increased delivery costs, exports of steel will remain profitable for Russian steel producers
📝Even during the global financial crisis in 2009, when global steel production fell by 8% YoY, Russian steelmakers restored their capacity utilization up to 100% in just two quarters
#steel #rusteel
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📌 The COVID-19 lockdown in the major steelmaking city of Tangshan, China was lifted on 31 March
• Previously, some steel mills in Tangshan had idled their BFs due to shortages of raw materials caused by the lockdown
❗️This might support China's steel supply and pressure steel prices
📝Tangshan accounts for 14% of China's steel output
#steel #China #COVID_19
• Previously, some steel mills in Tangshan had idled their BFs due to shortages of raw materials caused by the lockdown
❗️This might support China's steel supply and pressure steel prices
📝Tangshan accounts for 14% of China's steel output
#steel #China #COVID_19
💎Rough diamond market robust in February
• Rough diamond sales were strong in February, supported by continuing midstream restocking: De Beers sales grew 12% vs. the historical average level
• Further rough sales depend on the global demand for diamonds, which is, in turn, highly correlated with global macro trends
• Rapaport noted a strong decline in rough prices on secondary market in March. In our view, it means secondary market normalization after several months of abnormal prices
#diamonds
• Rough diamond sales were strong in February, supported by continuing midstream restocking: De Beers sales grew 12% vs. the historical average level
• Further rough sales depend on the global demand for diamonds, which is, in turn, highly correlated with global macro trends
• Rapaport noted a strong decline in rough prices on secondary market in March. In our view, it means secondary market normalization after several months of abnormal prices
#diamonds
💎Midstream restocking continues
• Indian net imports of roughs in February were 57% higher than the 2019 level -- an acceleration from January's 52%.
• Meanwhile, India’s polished diamond net exports decreased 17% vs. 2019 after 18% increase in January
🤓 India accounts for c.95% of global diamond polishing
#diamonds
• Indian net imports of roughs in February were 57% higher than the 2019 level -- an acceleration from January's 52%.
• Meanwhile, India’s polished diamond net exports decreased 17% vs. 2019 after 18% increase in January
🤓 India accounts for c.95% of global diamond polishing
#diamonds
💎Downstream sales were strong in Jan-Feb, but might be pressured amid the COVID-19 outbreak in China and weak consumer sentiment in the US
• Downstream sales were robust in February: preliminary data suggest a 22% YoY increase in US sales, driven by the rebound in consumer spending on apparel and accessories as consumers were preparing to return to physical offices as well as strong sales for Valentine’s Day.
• China’s jewellery and watch sales rose 20% in 2mo22, in line with our bullish expectations on Lunar holiday sales.
• However, downside risks loom due to Covid-19 related restrictions in China. Moreover, US consumer sentiment worsened in March, adversely affected by rising inflation and macro uncertainty – the respective index further declined 5% MoM
#diamonds
• Downstream sales were robust in February: preliminary data suggest a 22% YoY increase in US sales, driven by the rebound in consumer spending on apparel and accessories as consumers were preparing to return to physical offices as well as strong sales for Valentine’s Day.
• China’s jewellery and watch sales rose 20% in 2mo22, in line with our bullish expectations on Lunar holiday sales.
• However, downside risks loom due to Covid-19 related restrictions in China. Moreover, US consumer sentiment worsened in March, adversely affected by rising inflation and macro uncertainty – the respective index further declined 5% MoM
#diamonds
❌LME no longer accepts Russian metals: copper, aluminium (primary and alloys) and lead.
📦This relates to supply to LME warehouses
🤝Russian companies supply directly to customers
📌No effect on shipments of $GMKN, $RUAL
#copper #aluminium #lead #Russia
📦This relates to supply to LME warehouses
🤝Russian companies supply directly to customers
📌No effect on shipments of $GMKN, $RUAL
#copper #aluminium #lead #Russia
📌Global manufacturing PMIs declined in March
• US ISM manufacturing PMI fell to 57.1 (vs. 58.6 in February)
• Eurozone Markit Manufacturing PMI dropped to 56.5 from 58.2 in February
• The official China PMI decreased to 49.5 (vs. 50.2 in February), while China Caixin manufacturing PMI was down to 48.1 (vs. 50.4 in February)
❗️ The fact China's PMIs dropped below 50 suggests weakening manufacturing sector growth in the country. At the same time, PMIs above 50 in EU and the US might imply continuing momentum in manufacturing there.
#PMIs
• US ISM manufacturing PMI fell to 57.1 (vs. 58.6 in February)
• Eurozone Markit Manufacturing PMI dropped to 56.5 from 58.2 in February
• The official China PMI decreased to 49.5 (vs. 50.2 in February), while China Caixin manufacturing PMI was down to 48.1 (vs. 50.4 in February)
❗️ The fact China's PMIs dropped below 50 suggests weakening manufacturing sector growth in the country. At the same time, PMIs above 50 in EU and the US might imply continuing momentum in manufacturing there.
#PMIs
📌Turkey’s finished steel production decreased 3% YoY in February, with the rate of decline decelerating from 8% YoY in January
• Meanwhile, the country’s steel consumption was up 2% YoY in February (vs. 4% YoY decline in January)
• The growth of domestic consumption, coupled with the decline in production led to a 13% YoY rise in steel imports, while steel exports increased only 1% YoY in February
❗️According to Steel Orbis, Turkey’s steel production might be negatively affected by the tight supply of steelmaking raw materials from Russia and Ukraine in the coming months
#steel #Turkey
• Meanwhile, the country’s steel consumption was up 2% YoY in February (vs. 4% YoY decline in January)
• The growth of domestic consumption, coupled with the decline in production led to a 13% YoY rise in steel imports, while steel exports increased only 1% YoY in February
❗️According to Steel Orbis, Turkey’s steel production might be negatively affected by the tight supply of steelmaking raw materials from Russia and Ukraine in the coming months
#steel #Turkey
📌 Chile’s copper output was down 7% YoY in February
• The decline might have been caused by possible supply disruptions amid protests in some of Chile’s northern mining cities in mid-February
❗️Given Chile accounts for 28% of global copper supply, this might slightly support copper prices
#copper #Chile
• The decline might have been caused by possible supply disruptions amid protests in some of Chile’s northern mining cities in mid-February
❗️Given Chile accounts for 28% of global copper supply, this might slightly support copper prices
#copper #Chile
📌New property sales in China’s key cities fell 47% YoY in March
📝In 2mo22, China's property sales were down 10% YoY
❗️This might weaken China’s domestic demand for industrial metals
#steel #copper #aluminium
📝In 2mo22, China's property sales were down 10% YoY
❗️This might weaken China’s domestic demand for industrial metals
#steel #copper #aluminium
📌Aluminium prices supported by rising cash costs
• Aluminium prices increased 3% through March, driven mostly by rising costs amid the 10-40% increase of thermal coal prices. Supply concerns amid geopolitical tensions also supported price growth
• On the supply side, China's aluminium output fell 1% YoY in 2mo22. However, it might recover in the short term as China’s producers restart idled aluminium capacity amid the easing electricity crisis. At the same time, the growth of energy prices might lead to production disruptions in the EU, if smelters cannot realise sufficient margins
• China’s aluminium exports were up 23% YoY in 2mo22, which might have been caused by growing ex-China aluminium consumption (up 6-8% MoM in 2mo22). This reasoning was supported by the rise in aluminium premiums, with the US Midwest P1020 premium and the European duty paid ingot premium up 8% MoM and 26% MoM, respectively. Meanwhile, the Japan Ingot premium declined 9% MoM in March as automotive demand remained weak
#aluminium
• Aluminium prices increased 3% through March, driven mostly by rising costs amid the 10-40% increase of thermal coal prices. Supply concerns amid geopolitical tensions also supported price growth
• On the supply side, China's aluminium output fell 1% YoY in 2mo22. However, it might recover in the short term as China’s producers restart idled aluminium capacity amid the easing electricity crisis. At the same time, the growth of energy prices might lead to production disruptions in the EU, if smelters cannot realise sufficient margins
• China’s aluminium exports were up 23% YoY in 2mo22, which might have been caused by growing ex-China aluminium consumption (up 6-8% MoM in 2mo22). This reasoning was supported by the rise in aluminium premiums, with the US Midwest P1020 premium and the European duty paid ingot premium up 8% MoM and 26% MoM, respectively. Meanwhile, the Japan Ingot premium declined 9% MoM in March as automotive demand remained weak
#aluminium
📌 Copper underperformed other base metals in March due to weak Chinese demand and recession fears
• Copper construction demand in China remains subdued, with a weak construction pipeline, according to CRU; relief in 2022 looks unlikely
• The copper price underperformed other base metals in March, growing 'only' 2% MoM despite supply risks from Russia, due to global risk-off and recession anticipation (the copper price is usually linked with the state of the global economy, as copper is used in construction and industrial goods manufacturing). CRU also notes that despite the low level of exchange inventories, there is no shortage of cathode in the physical spot markets
• On the supply side, CRU expects new and expansion projects to add 4.3% YoY to global production in 2022. We believe that the copper price might be pressured by supply recovery and modest demand from China. However, supply short-term supply risks remain due to the continuing blockade of the Las Bambas mine (1.7% of global supply)
#copper
• Copper construction demand in China remains subdued, with a weak construction pipeline, according to CRU; relief in 2022 looks unlikely
• The copper price underperformed other base metals in March, growing 'only' 2% MoM despite supply risks from Russia, due to global risk-off and recession anticipation (the copper price is usually linked with the state of the global economy, as copper is used in construction and industrial goods manufacturing). CRU also notes that despite the low level of exchange inventories, there is no shortage of cathode in the physical spot markets
• On the supply side, CRU expects new and expansion projects to add 4.3% YoY to global production in 2022. We believe that the copper price might be pressured by supply recovery and modest demand from China. However, supply short-term supply risks remain due to the continuing blockade of the Las Bambas mine (1.7% of global supply)
#copper
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☢️ Medium- and long-term outlooks on uranium demand brighten as countries intend to diversify energy sources
• The uranium spot price rose 21% over the course of March to one of the historical highest levels of USD 58.6/lb, driven by energy supply concerns amid geopolitical uncertainty
• The Energy Transitions Commission Chair said that countries should keep their nuclear plants online as long as possible to help reduce dependence on fossil fuels, which have recently experienced price rises. Greater emphasis on nuclear power generation in order to reduce the usage of fossil fuels supports the demand for uranium
• At the same time, in March, the Sprott Physical Uranium Trust further increased its uranium holdings 10%, which was also supportive for the uranium price
• On the supply side, Kazatomprom announced that it does not plan to revise 2022-23 production plans, while the decision on the 2024 production level is to be announced in 3Q22
#uranium
• The uranium spot price rose 21% over the course of March to one of the historical highest levels of USD 58.6/lb, driven by energy supply concerns amid geopolitical uncertainty
• The Energy Transitions Commission Chair said that countries should keep their nuclear plants online as long as possible to help reduce dependence on fossil fuels, which have recently experienced price rises. Greater emphasis on nuclear power generation in order to reduce the usage of fossil fuels supports the demand for uranium
• At the same time, in March, the Sprott Physical Uranium Trust further increased its uranium holdings 10%, which was also supportive for the uranium price
• On the supply side, Kazatomprom announced that it does not plan to revise 2022-23 production plans, while the decision on the 2024 production level is to be announced in 3Q22
#uranium
☢️ Why Kazatomprom looks interesting
❗️Uranium is currently a fashionable commodity, as major western countries are developing strategies to accelerate their shift from fossil fuels. Kazatomprom accounts for more than 40% of the global mine supply. However, since the beginning of 2022, Kazatomprom has significantly underperformed its main competitor, Cameco: -19% YTD vs. +33% YTD.
• In the short term, there are few sources of additional uranium supply.
• Kazatom looks attractive at spot, trading at 4.0x 1-y fwd EV/EBITDA and generating 15-16% FCF and dividend yield.
• Risks: there are solid civil stockpiles of uranium in China, the EU and the US. Moreover, Sprott inventories are at 53.6mnlb, which is >30% of global annual demand. As the current price is c.20% above the weighted average purchasing price, we believe that there is a potential risk of holdings redemptions.
$KAP #uranium
❗️Uranium is currently a fashionable commodity, as major western countries are developing strategies to accelerate their shift from fossil fuels. Kazatomprom accounts for more than 40% of the global mine supply. However, since the beginning of 2022, Kazatomprom has significantly underperformed its main competitor, Cameco: -19% YTD vs. +33% YTD.
• In the short term, there are few sources of additional uranium supply.
• Kazatom looks attractive at spot, trading at 4.0x 1-y fwd EV/EBITDA and generating 15-16% FCF and dividend yield.
• Risks: there are solid civil stockpiles of uranium in China, the EU and the US. Moreover, Sprott inventories are at 53.6mnlb, which is >30% of global annual demand. As the current price is c.20% above the weighted average purchasing price, we believe that there is a potential risk of holdings redemptions.
$KAP #uranium
⛏Nexa Resources has restored operations to full capacity at its Vazante zinc mine in Brazil
• In mid-January, production at the mine was reduced to 60% of its capacity due to flooding amid heavy rains
📝 The Vazante mine accounts for 1% of global zinc production
❗️Despite the production curtailments, the company reiterated Vazante’s zinc production guidance of 118-127kt in 2022
💰On spot prices, Nexa Resources trades at 2x 1-y fwd EV/EBITDA and generates a 30% FCF yield
• The company has exposure mostly to zinc (90% of revenue), copper (5%), and also silver, lead and gold
$NEXA #zinc
• In mid-January, production at the mine was reduced to 60% of its capacity due to flooding amid heavy rains
📝 The Vazante mine accounts for 1% of global zinc production
❗️Despite the production curtailments, the company reiterated Vazante’s zinc production guidance of 118-127kt in 2022
💰On spot prices, Nexa Resources trades at 2x 1-y fwd EV/EBITDA and generates a 30% FCF yield
• The company has exposure mostly to zinc (90% of revenue), copper (5%), and also silver, lead and gold
$NEXA #zinc