INSTITUTIONAL EQUITY RESEARCH Metalsbackoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_Metals... · Net steel exports at 3.5mn tonnes fell 17%/6 yoy/mom. 11MCY19 net steel

INSTITUTIONAL EQUITY RESEARCH

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH Please see penultimate page for additional important disclosures. PhillipCapital (India) Private Limited. (“PHILLIPCAP”) is a foreign broker-dealer unregistered in the USA. PHILLIPCAP research is prepared by research analysts who are not registered in the USA. PHILLIPCAP research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities Inc, an SEC registered and FINRA-member broker-dealer.

Metals

Monthly wrap

INDIA

23 December 2019

Key highlights Global crude steel production moderated- Global crude steel production for November 2019 fell 1% yoy to 148mn tonnes as higher production by China was more than offset by lower production in India, japan, EU, CIS and America. On average daily production basis global crude steel output jumped 1% to 4.9mn tonnes. Chinese production accounted for 54.3% of global production, up 260bps yoy and 70 bps mom.

Steel prices started improving: China, US, EU and CIS reported mom price increase of 3%, 7%, 1% and 10%, respectively. While India reported 1% hike.

Iron ore also improved but coking coal fell: Iron-ore fines (63.5 Fe China export) prices improved 9% mom to US$ 92/t. Coking coal prices (Premium HCC FOB Australia) fell 2% mom to US$ 134/t.

Chinese production improved again; exports continues to fall

Chinese crude steel production improved 4% yoy to 80.3mn tonnes. Avg. daily production also improved 1.8% mom. Net steel exports at 3.5mn tonnes fell 17%/6 yoy/mom. 11MCY19 net steel export fell 5.8% yoy.

Chinese steel (steelhome) inventories fell 8% mom to c.8mn tonnes.

Chinese HRC domestic prices improved 3% mom.

At current prices, Chinese steel mill is making profits of c.CNY 348/t.

Iron ore imports fell 2.4% mom to 91mn tonnes. Current inventory days remained flattish mom to c.40 days of production at November average daily production run rate.

Indian steel prices are under pressure on slowing demand

October crude steel production fell 2.8% yoy to 8.9mn tonnes while consumption fell 3% yoy to 7.4mn tonnes. 8MFY20 steel consumption grew 3.6% to 66.5mn tonnes.

India remained net exporter for fourth consecutive month. Net steel exports stood at 438KT vs imports of 177KT yoy. Korea (44%), Japan (13%), Indonesia (13%) and China (13%) together enjoy c.75% of market share.

Current domestic HRC at Rs 34,700/tonne jumped marginally mom.

Discount between imported vs domestic iron ore stands at 37%. Non-ferrous: Prices falling

Global aluminium production contracted 2.5% yoy to 5.2 mn tonnes, following c.5% fall in Chinese production to 2.9mn tonnes.

Global and China mom average daily production remained flat at 173KT and 96KT, respectively.

Aluminium prices witnessed marginal improvement of 1% mom to US$ 1,774/t. The gap between LME and Shanghai prices stands at US$ 268/t, US$ 30/t fall on mom basis.

Aluminium inventories on major exchanges jumped to 1.7mn tonnes.

China’s aluminium exports at 400KT fell 15% yoy but improved 3% mom.

Chinese captive power and grid power smelter profitability improved each by CNY391/t mom to CNY 3,461/t and CNY 761/t.

Aluminium CoP also witnessed downward trend. Alumina, Anode and caustic soda prices fell 1%, 3% and 5% mom. While coal prices remained flattish.

Zinc prices improved 2% mom to US$ 2,340/t but Lead prices fell by 2% to US$ 1,928/t, respectively.

Zinc TC/remained at elevated levels of US$ 295/t.

Zinc inventories fell mom while lead inventories improved.

Indices (rebased)

Absolute Performance Change 1M 3M 6M

China HRC 2.8 4.8 1.5 Europe HRC 1.0 -9.1 -20.3 US HRC 7.2 0.9 -24.7 Black SEA 10.7 1.7 0.6 India HRC 0.6 -3.6 -22.0 Iron ore 9.4 0.5 31.4 Coking coal -1.5 -6.8 -41.0 Aluminium 1.3 0.3 -7.5 Zinc 1.7 1.3 -9.4 Copper 5.0 6.5 3.0 Lead 1.9 -9.4 -2.5 Alumina -0.5 -4.9 -33.3 Thermal coal -0.6 1.4 -34.8 INR 0.8 -0.3 1.4

Source: Company, PhillipCapital India Research

Vikash Singh, Research Analyst (+ 9122 6246 4128) [email protected]

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BSE Sensex BSE Metal Index

Page | 2 | PHILLIPCAPITAL INDIA RESEARCH

METALS MONTHLY WRAP UP

Global crude steel production 000 tonnes Nov-18 Oct-19 Nov-19 YOY% MOM% 8MFY19 8MFY20 YOY%

European Union (28)

Austria 673 609 590 (12.3) (3.1) 4,251 4,899 15.2

France 1,351 1,181 1,105 (18.2) (6.4) 10,286 9,661 (6.1)

Germany 3,689 3,323 3,215 (12.8) (3.3) 28,372 26,648 (6.1)

Italy 2,186 2,225 1,971 (9.8) (11.4) 16,404 15,507 (5.5)

Netherlands 578 574 545 (5.7) (5.1) 4,493 4,334 (3.5)

Poland 850 756 730 (14.1) (3.4) 6,614 5,921 (10.5)

Spain 1,201 1,225 1,070 (10.9) (12.7) 9,756 9,443 (3.2)

United Kingdom 567 610 550 (3.0) (9.8) 4,954 4,761 (3.9)

Other E.U. 3,221 2,967 3,013 (6.5) 1.5 26,607 25,165 (5.4)

European Union 14,316 13,470 12,789 (10.7) (5.1) 1,11,744 1,06,339 (4.8)

Contribution 9.6% 8.9% 8.7%

9.2% 8.6%

CIS (6)

- - Russia 5,786 5,806 5,620 (2.9) (3.2) 48,100 47,122 (2.0)

Ukraine 1,658 1,561 1,325 (20.1) (15.1) 13,961 13,777 (1.3)

Uzbekistan 52 47 45 (13.5) (4.3) 443 438 (1.1)

C.I.S. 7,896 8,022 7,580 (4.0) (5.5) 67,337 66,278 (1.6)

Contribution '%' 5.3% 5.3% 5.1%

5.5% 5.3% North America

- -

Canada 1,058 1,016 985 (6.9) (3.1) 8,782 8,467 (3.6)

Mexico 1,538 1,469 1,420 (7.7) (3.3) 13,384 11,972 (10.6)

United States 7,399 7,250 7,233 (2.2) (0.2) 58,313 58,549 0.4

North America 10,053 9,790 9,693 (3.6) (1.0) 80,898 79,444 (1.8)

Contribution '%' 6.7% 6.5% 6.6%

6.7% 6.4% South America - - - - -

Brazil 2,911 2,597 2,604 (10.6) 0.3 23,745 21,118 (11.1)

Other South American 835 778 759 (9.1) (2.4) 6,509 6,140 (5.7)

South America 3,747 3,375 3,363 (10.2) (0.4) 30,253 27,258 (9.9)

Contribution '%' 2.5% 2.2% 2.3% 3.2% 2.2%

Africa 1,250 1,085 951 (24.0) (12.4) 9,744 8,582 (11.9)

Contribution '%' 0.8% 0.7% 0.6% 0.8% 0.7%

Iran 2,187 2,200 2,130 (2.6) (3.2) 16,641 17,424 4.7

Qatar 176 228 174 (1.1) (23.7) 1,749 1,741 (0.4)

Saudi Arabia 435 331 399 (8.3) 20.5 3,580 3,291 (8.1)

Middle East 3,096 3,044 2,992 (3.4) (1.7) 24,192 24,687 2.0

Contribution '%' 2.1% 2.0% 2.0% 2.0% 2.0%

Asia - -

China 77,213 81,521 80,287 4.0 (1.5) 6,37,256 6,78,710 6.5

India 9,192 8,988 8,934 (2.8) (0.6) 72,068 72,525 0.6

Japan 8,659 8,150 7,743 (10.6) (5.0) 69,454 66,550 (4.2)

South Korea 5,923 5,999 5,895 (0.5) (1.7) 48,487 47,893 (1.2)

Asia 1,05,049 1,08,696 1,06,745 1.6 (1.8) 8,60,047 8,98,402 4.5

Contribution '%' 70.3% 72.0% 72.2% 70.7% 72.5%

Oceania 474 539 508 7.0 (5.9) 4,276 4,216 (1.4)

Total 1,49,356 1,51,055 1,47,791 (1.0) (2.2) 12,15,657 12,40,018 2.0

Note: The 64 countries included in this table accounted for ~99% of total world crude steel production in 2018.

Source: World Steel Association

Global crude steel production for November 2019 fell 1% yoy to 148mn tonnes as higher production by China was more than offset by lower production in India, japan, EU, CIS and America. On average daily production basis global crude steel output jumped 1% to 4.9mn tonnes. Chinese production accounted for 54.3% of global production, up 260bps yoy and 70 bps mom. 8MFY20 global crude steel production grew by 2% to c. 1.2bn tonnes largely on account of higher production in China (6.5% higher yoy).



Ferrous: Global

Markit Eurozone Manufacturing PMI

PMI at 46.9 improved 100bps mom but remained under 50 mark denoting contraction.

Europe steel production (mn tonne)

Euro zone November 2019 crude steel production at 12.7mn tonnes fell 11% yoy.

Europe apparent steel consumption (mn tonnes)

EU apparent consumption in November remained under pressure.

Europe domestic HRC price ex-works (USD/tonne)

South Europe prices jumped sharply (9%) mom while North Europe prices jumped 1% mom.

Black Sea HRC Spot FoB (USD/tonne)

Black Sea HRC export prices jumped 11% mom and 1% yoy.

Turkey scrap prices – (USD/tonne)

Scrap prices were flat mom but jumped 2%yoy to US$ 380/t.

Source: Bloomberg

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Europe Steel Production YoY growth (RHS)

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Markit US Manufacturing PMI

US PMI improved 130bps mom to 52.6 (50 separates growth from contraction).

US steel capacity utilisation (%)

Steel capacity utilizations for November fell 80 bps yoy but remained flat mon at 80.4%.

US HRC price (USD/tonne)

US domestic HRC prices improved 7% mom but remained 25% lower yoy to US$ 580/t.

US apparent consumption (mn tonne)

US apparent steel consumption for November 2019 fell about 5% yoy.

Europe EAF steel profitability (USD/tonne)

Europe EAF steel mill profitability fell sharply of late.

Source: Bloomberg

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-30%

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Ferrous: China

China crude steel production (mn tonnes)

Chinese crude steel production jumped 4% yoy to 80.3mn tonnes. Avg. daily production improved 1.8% mom.

China net steel exports (mn tonnes)

Net steel exports at 3.5mn tonnes fell 17%/6 yoy/mom. 11MCY19 net steel export fell 5.8% yoy.

China Steel demand – (mn tonne)

China’s mom apparent steel demand fell marginally.

Chine HRC prices – (US$/tonne)

Chinese domestic as well as export prices improved 3% mom to US$ 549/t and US$ 470/t.

Tangshan BF utilisation rate – (%)

Blast furnace utilisations at 76.8% fell 80 bps mom.

China BoF Steel profitability (CNY/tonne)

Domestic steel profitability improved sharply.

Source: Bloomberg

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Import Export Net of Export/(Import)

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Domestic Export

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China iron ore imports (mn tonne)

Iron-ore imports at 91mn tonnes fell 2.4% mom but improved 5% yoy.

Share of iron-ore exporters in Chinese ore imports (%)

Share of major exporter remained flattish mom.

China iron-ore weekly inventory (mn tonnes)

Iron ore inventories at 107mn tonnes fell 3%/14 mom/yoy.

Iron-ore inventory to consumption days

Inventory to consumption day remained range bound between 40-42 days (calculated on daily steel production run rate).

China import – 63.5% Fe Iron ore, CIF (USD/tonne)

Iron ore price at US$ 92/t improved 9%/31% mom/yoy.

China import 65% Fe pellet, CFR – (USD/tonne)

Pellet prices improved4.5% mom but fell 9.3% yoy.

Source: Bloomberg

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%

India Australia Brazil Other countries

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Spread between 63.5% and 58% Fe imported iron ore (USD/tonne)

Gap between high vs. low-grade iron ore jumped to US$ 17/t from US$ 7-9/t a month ago.

China coke production (mn tonne)

China coke production improved 9% yoy but remained flat mom to 38.6 mn tonnes.

Australia premium hard coking coal price – (USD / tonne)

Coking coal prices at US$ 134/t fell 2%/41% mom/yoy.

China domestic coke spot price (USD / tonne)

Coke prices at US$ 304/t fell 19% yoy but jumped 4% mom.

Steelhome China inventory – (mn tonne)

Inventories moderated c.8% mom to c.8 mn tonnes.

Source: Bloomberg

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Long Flat



Ferrous: India

Crude steel production (mn tonnes)

Indian crude steel production for November fell 2.8% yoy to 8.9mn tonnes.

India steel consumption (mn tonne)

November steel demand also moderated by 3% yoy to 7.4mn tonnes. 8MFY20 consumption grew at 3.6% to 66.5 mn tonnes.

Net steel import/ (export) – mn tonnes

November net steel exports stood at 438KT vs imports of 177KT yoy.

County-wise Steel import share

Korea remained largest exporter of steel in India.

Sponge iron price, Raipur – (Rs / tonne)

Sponge iron prices improved 9% mom to Rs 20,100/t.

Pig iron price, Raipur – (Rs / tonne)

Pig iron prices also improved 2% mom to Rs 24,500/t.

Source: JPC, Steelmint

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

May

-19

Au

g-1

9

No

v-1

9

4

5

6

7

8

9

10

No

v-1

6

Jan

-17

Mar

-17

May

-17

Jul-

17

Sep

-17

No

v-1

7

Jan

-18

Mar

-18

May

-18

Jul-

18

Sep

-18

No

v-1

8

Jan

-19

Mar

-19

May

-19

Jul-

19

Sep

-19

No

v-1

9

(1.00)

(0.80)

(0.60)

(0.40)

(0.20)

-

0.20

0.40

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

May

-19

Au

g-1

9

No

v-1

9

Mn

to

nn

es

31% 38%

44%

10%

11% 13%

33% 27% 13%

1% 7%

5%

24% 17%

25%

0%

20%

40%

60%

80%

100%

`Nov 19 `Oct 20 `Nov 20

Others

Indonesia

China

Japan

Korea

10000

12000

14000

16000

18000

20000

22000

24000

26000

28000

30000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

15,000

17,000

19,000

21,000

23,000

25,000

27,000

29,000

31,000

33,000

35,000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19



Billet price, Raigarh (Rs / tonne)

Billet prices improved 4% mom to Rs 27,050/t.

Wire Rod and HB wire price, Raipur (Rs / tonne)

Both HB wires and wire-rod prices improved 5-6% mom.

Domestic HRC price – Mumbai (Rs/tonne)

Domestic HRC (in warehouse) improved 2%mom to Rs 34,700/t.

Domestic HRC premium/(discount) - Rs/tonne

Domestic HRC prices are trading at steep discount to Chinese imported prices; However; it’s about at par vs Japanese import price.

NMDC Chattisgarh price (Rs/tonne)

NMDC kept prices unchanged in December.

Imported iron ore vs. NMDC parity (Rs/tonne)

NMDC`s iron ore is trading at c.37% discount to imported iron ore prices.

Source: JPC, Steelmint

15000

20000

25000

30000

35000

40000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

HB Wire(12 Gauge) Wire Rod(5.5 Mm)

25000

30000

35000

40000

45000

50000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

-8,000

-6,000

-4,000

-2,000

-

2,000

4,000

6,000

8,000

Jan

-18

Feb

-18

Mar

-18

Ap

r-1

8M

ay-1

8Ju

n-1

8Ju

l-1

8A

ug-

18

Sep

-18

Oct

-18

No

v-1

8D

ec-1

8Ja

n-1

9Fe

b-1

9M

ar-1

9A

pr-

19

May

-19

Jun

-19

Jul-

19

Au

g-1

9Se

p-1

9O

ct-1

9N

ov-

19

Dec

-19

1,000

1,500

2,000

2,500

3,000

3,500

4,000

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

May

-19

Au

g-1

9

No

v-1

9

Fines Lump

-2,000

-1,000

-

1,000

2,000

3,000

4,000

5,000

Mar

-17

May

-17

Jul-

17

Sep

-17

No

v-1

7

Jan

-18

Mar

-18

May

-18

Jul-

18

Sep

-18

No

v-1

8

Jan

-19

Mar

-19

May

-19

Jul-

19

Sep

-19

No

v-1

9

Lump Fines



Ferro Alloys

Chrome ore – Barbil, Orissa (Rs/tonnes)

Chrome ore prices fell 6% mom.

Ferro chrome – Jajpur, Orissa (Rs/tonnes)

Ferro chrome prices fell 5% mom to Rs 59,000/t.

Manganese ore – Balaghat, MP (Rs/tonnes)

Manganese ore mom remained flat mom to Rs 9,360/t.

Ferro manganese - Raipur (Rs/tonnes)

Ferro manganese prices improved 3% mom to 60,500/t.

Ferro silicon - Bhutan (Rs/tonnes)

Ferro silicon prices jumped 12% mom to Rs 72,000/t.

Silico manganese - Raipur (Rs/tonnes)

Silico manganese prices improved 3% mom to 58,750/t.

Source: Steelmint

0

5000

10000

15000

20000

25000

30000

35000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

Friable 48-50% Friable 54%+

15000

35000

55000

75000

95000

115000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Dec

-16

Feb

-17

Ap

r-1

7

Jun

-17

Au

g-1

7

Oct

-17

Dec

-17

Feb

-18

Ap

r-1

8

Jun

-18

Au

g-1

8

Oct

-18

Dec

-18

Feb

-19

Ap

r-1

9

Jun

-19

Au

g-1

9

Oct

-19

Dec

-19

20000

30000

40000

50000

60000

70000

80000

90000

Dec

-16

Feb

-17

Ap

r-1

7

Jun

-17

Au

g-1

7

Oct

-17

Dec

-17

Feb

-18

Ap

r-1

8

Jun

-18

Au

g-1

8

Oct

-18

Dec

-18

Feb

-19

Ap

r-1

9

Jun

-19

Au

g-1

9

Oct

-19

Dec

-19

40000

50000

60000

70000

80000

90000

100000

110000

120000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

25000

35000

45000

55000

65000

75000

85000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19



Non-ferrous: Aluminium

Global primary aluminium production (mn tonnes)

Global aluminium production contracted 2.5% yoy to 5.2 mn tonnes. Average daily production at 173KT remained flat mom.

Aluminium inventory on major exchanges (‘000 tonnes)

Aluminium inventories on major exchanges jumped of late to 1.7mn tonnes of late.

China: Primary aluminium production (mn tonnes)

Chinese production de-grew 5.3% yoy to 2.9mn tonnes. Average daily production at 96KT remained flat mom.

China aluminium exports (‘000 tonne)

China’s aluminium exports at 400KT fell 15% yoy but improved 3% mom.

Aluminium spot prices - (USD / tonne)

LME prices at US$ 1,764/t were down 7% yoy. The gap between LME and China prices stands at US$ 268/t, US$ 30 fall on mom basis.

Regional premiums (USD / tonne)

US premium fell sharply..

Source: Bloomberg

3.0

3.5

4.0

4.5

5.0

5.5

6.0

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

May

-19

Au

g-1

9

No

v-1

9

-

500

1,000

1,500

2,000

2,500

3,000

Jan

-17

Feb

-17

Ap

r-1

7M

ay-1

7Ju

l-1

7A

ug-

17

Sep

-17

No

v-1

7D

ec-1

7Fe

b-1

8M

ar-1

8M

ay-1

8Ju

n-1

8A

ug-

18

Sep

-18

No

v-1

8D

ec-1

8Fe

b-1

9M

ar-1

9M

ay-1

9Ju

n-1

9A

ug-

19

Sep

-19

No

v-1

9D

ec-1

9

LME SHFE

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

3.5

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

May

-19

Au

g-1

9

No

v-1

9

200

250

300

350

400

450

500

550

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

May

-19

Au

g-1

9

No

v-1

9

`00

0 t

on

nes

Exports 5 year avg.

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

Oct

-16

Jan

-17

Mar

-17

Jun

-17

Au

g-1

7

No

v-1

7

Jan

-18

Ap

r-1

8

Jun

-18

Sep

-18

No

v-1

8

Feb

-19

Ap

r-1

9

Jul-

19

Sep

-19

No

v-1

9

LME Aluminium Spot Shinghai Spot

-

100

200

300

400

500

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

US Midwest EU Rotterdam Japan



China smelter profitability (captive power) - CNY/tonne

Chinese captive power smelter profitability improved 15% mom to CNY 3,461/t.

China smelter profitability (grid power) - CNY/tonne

Chinese non-integrated smelters profitability also improved mom to CNY 761/t.

Australia alumina FoB - (USD / tonne)

Alumina prices at US$ 2790/t fell 33% yoy but remained flat mom.

China prebaked anodes (USD / tonne)

Anode prices fell 23%/3% yoy/ mom.

Caustic soda - SE Asia, CFR (USD / tonne)

Caustic soda prices fell 10%/5% yoy/mom to US$ 311/t.

Indonesia coal 6,322 Kcal - (USD / tonne)

Coal prices remained flat mom.

Source: Bloomberg

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

CN

Y/to

nn

e

Profitability - Captive power Average

(2,000)

(1,000)

-

1,000

2,000

3,000

4,000

Dec

-15

Mar

-16

Jun

-16

Sep

-16

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

CN

Y/to

nn

e

Profitability - GRID power 8 year average

100

200

300

400

500

600

700

Jun

-17

Au

g-1

7

Oct

-17

Dec

-17

Feb

-18

Ap

r-1

8

Jun

-18

Au

g-1

8

Oct

-18

Dec

-18

Feb

-19

Ap

r-1

9

Jun

-19

Au

g-1

9

Oct

-19

Dec

-19

200

300

400

500

600

700

800

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

-

100

200

300

400

500

600

700

800

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

-

20

40

60

80

100

120

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19



Non-ferrous: Zinc and Lead

Zinc LME price – USD/tonne

Zinc prices improved 2% mom to US$ 2,340/t.

Major exchange zinc inventory (‘000 tonnes)

Inventories fell of late.

China zinc imports (tonnes)

Chinese October zinc imports witnessed 64% yoy fall.

China zinc concentrate TC 50% CIF – USD/tonne

Treatment charges continue to improve.

Lead LME prices – USD/tonne

Lead prices fell 2% mom to US$ 1,928/t.

Major exchange lead inventory (‘000 tonnes)

Inventories have improved mom.

Source: Bloomberg

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

-

20

40

60

80

100

120

140

160

180

200

Ap

r-1

9

Ap

r-1

9

May

-19

May

-19

Jun

-19

Jun

-19

Jul-

19

Jul-

19

Au

g-1

9

Au

g-1

9

Au

g-1

9

Sep

-19

Sep

-19

Oct

-19

Oct

-19

No

v-1

9

No

v-1

9

Dec

-19

LME SHFE

-

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

May

-19

Au

g-1

9

No

v-1

9

0

50

100

150

200

250

300

350

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

-

50

100

150

200

250

300

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Dec

-17

Mar

-18

Jun

-18

Sep

-18

Dec

-18

Mar

-19

Jun

-19

Sep

-19

Dec

-19

LME SHFE



Valuation

CMP TP (Rs) Rating Adj EPS (Rs) PER (x) EV/EBITDA (x) Net Debt/Equity (x) P/BV (x) RoE (%)

Rs FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E

Ferrous

Tata Steel 462 485 Buy 18.5 47.1 25.0 9.8 8.3 6.1 1.5 1.3 0.8 0.7 3.0 7.4

Jindal Steel and Power 158 210 Buy -5.6 7.1 -28.4 22.2 6.4 4.9 1.1 1.0 0.5 0.5 -1.7 2.1

JSW Steel 264 198 Sell 11.1 15.4 23.7 17.1 9.1 7.5 1.4 1.4 1.7 1.6 7.4 9.5

SAIL 41 50 Buy -1.7 4.4 -23.6 9.3 12.4 7.2 1.2 1.1 0.4 0.4 -1.8 4.4

NMDC 124 123 Buy 13.6 17.3 9.1 7.2 6.5 5.0 -0.1 -0.1 1.4 1.2 14.9 17.0

Non-Ferrous Vedanta 148 195 Buy 10.4 15.0 14.3 9.9 4.7 4.2 0.7 0.6 0.9 0.9 6.2 8.8

Hindustan Zinc 211 215 Neutral 17.9 17.8 11.8 11.8 7.4 6.9 -0.5 -0.5 2.6 2.6 22.4 22.2

Nalco 41 40 Neutral 1.3 3.4 32.2 12.1 11.2 6.2 -0.2 -0.1 0.8 0.8 2.4 6.3

Hindalco 211 253 Buy 21.2 22.9 10.0 9.2 6.4 5.8 0.7 0.6 0.8 0.7 7.6 7.7

Source: PhillipCapital India Research Estimates



Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year. We have different threshold for large market capitalisation stock and Mid/small market capitalisation stock. The categorisation of stock based on market capitalisation is as per the SEBI requirement.

Large cap stocks Rating Criteria Definition

BUY >= +10% Target price is equal to or more than 10% of current market price

NEUTRAL -10% > to < +10% Target price is less than +10% but more than -10%

SELL <= -10% Target price is less than or equal to -10%.

Mid cap and Small cap stocks Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%

SELL <= -15% Target price is less than or equal to -15%.

Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.

This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.

This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.

Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.

Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.

Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in

this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the

company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this

research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for

any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for

the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in

connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:



Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No

4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report

No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.

Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

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Kindly note that past performance is not necessarily a guide to future performance.

For Detailed Disclaimer: Please visit our website www.phillipcapital.in IMPORTANT DISCLOSURES FOR U.S. PERSONS This research report is a product of PhillipCapital (India) Pvt. Ltd. which is the employer of the research analyst(s) who has prepared the research report. PhillipCapital (India) Pvt Ltd. is authorized to engage in securities activities in India. PHILLIPCAP is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor.

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The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account. Ownership and Material Conflicts of Interest Rosenblatt Securities Inc. or its affiliates does not ‘beneficially own,’ as determined in accordance with Section 13(d) of the Exchange Act, 1% or more of any of the equity securities mentioned in the report. Rosenblatt Securities Inc, its affiliates and/or their respective officers, directors or employees may have interests, or long or short positions, and may at any time make purchases or sales as a principal or agent of the securities referred to herein. Rosenblatt Securities Inc. is not aware of any material conflict of interest as of the date of this publication Compensation and Investment Banking Activities

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Rosenblatt Securities Inc. or any affiliate has not managed or co-managed a public offering of securities for the subject company in the past 12 months, nor received compensation for investment banking services from the subject company in the past 12 months, neither does it or any affiliate expect to receive, or intends to seek compensation for investment banking services from the subject company in the next 3 months. Additional Disclosures This research report is for distribution only under such circumstances as may be permitted by applicable law. This research report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to a single recipient. This research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to in this research report. Neither PHILLIPCAP nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from the use of this research report.

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The value of any investment or income from any securities or related financial instruments discussed in this research report denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related financial instruments.

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Documents

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