Interesting possible cyclical turn-around. Figures just out:
Arcelormittal Q1 EBITDA of $927 million above estimates
Arcelormittal
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ArcelorMittal (MT)
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05-07-2016, 07:17 AM
Tokyo Steel Manufacturing Co. raised its main product prices for the first time in over two years in response to gains in China, the world’s largest market for the metal. Japan’s biggest steel producer from scrap metal set its May contracts for H-beam steel at 72,000 yen ($667) a metric ton, up 5,000 yen on April, according to a statement Monday. That’s the first increase since January 2014. It raised its hot-rolled coil prices by 3,000 yen to to 53,000 yen a ton, for the first increase since December 2013. Tokyo Steel Raises Prices for First Time in Over Two Years - Bloomberg Reinforcement bars are about as unglamorous an industrial product as one can get. Their rally in China this week is anything but, with a surge to the highest since 2014 that’s helping to lift iron ore. Rebar futures jumped for the fourth straight day on Shanghai Futures Exchange, advancing as much as 6.3 percent to 2,755 yuan ($425) a metric ton. The product that’s used to strengthen concrete is 19 percent higher this week, and up 53 percent in 2016. Iron ore futures in Dalian rose to the highest since March 2015 on Thursday after benchmark Metal Bulletin Ltd. prices gained on Wednesday to the highest in 10 months. The 53% Rally in Steel Prices That Points to China's Rapid Shift - Bloomberg ArcelorMittal reported a disastrous loss of $7.9 billion in 2015, including a massive $6.7 billion loss in the fourth quarter. The world's largest steelmaker said late last week that it planned to raise $3 billion in fresh capital in a bid to reduce debt in the face of weak steel and mining sectors. The steel major is also set to receive about $1 billion from the sale of a 35% stake in automotive steel specialist Gestamp. The company, twice the size of its nearest rival, reported that its core profit (EBITDA) dropped by 32 percent last year to $5.2 billion and warned the result this year would only be "in excess of" $4.5 billion as it sees little improvement in overall global demand for steel this year. Chief Executive Lakshmi Mittal said that 2015 had been very difficult for steelmakers and miners, even with some rises in demand in Europe and the United States where the company does the bulk of its business, due to Chinese exports depressing prices. ArcelorMittal to raise $3 billion after Chinese steel exports hit profits | Reuters More specifically, the company gets 28% of its revenue from the North America region, while Europe accounts for almost 50% of its sales. Is ArcelorMittal Getting Ready For A Turnaround? - ArcelorMittal (NYSE:MT) | Seeking Alpha
05-07-2016, 07:18 AM
Iron ore has taken a one-two punch as China’s moves to cool frenzied speculation in raw material futures hurt prices in the top user, while rising port stockpiles signal ample supply for steelmakers. Benchmark prices for cargoes delivered to Qingdao have lost more than 9 percent in the past two sessions, while futures in Dalian fell for a third day on Thursday, losing as much as 4.8 percent. The decline has hurt miners’ shares, with BHP Billiton Ltd. and Fortescue Metals Group Ltd. lower in Sydney. Iron Ore Takes One-Two Punch as Frenzy Cools, Stockpiles Expand - Bloomberg Corrosion-resistant steel imports from China were sold at unfairly low prices and will be taxed at 256 percent, according to a preliminary finding of the U.S. Department of Commerce. U.S. Calls for 256% Tariff on Imports of Steel From China - Bloomberg The fever that’s gripped Chinese commodity markets is easing. Speculators who traded 1.7 trillion yuan ($261 billion) futures in a single day last month have retreated as fast as they advanced. Trading volumes across the nation’s three biggest exchanges are more than half of what they were at their peak on April 22 and back to levels similar to a year ago, according to data compiled by Bloomberg. The amount of money changing hands on a daily basis has shrunk to $114 billion. China's Great Commodity Bubble Loses Air Before It Can Burst - Bloomberg China, maker of half the world’s steel, probably boosted production to a record in April as mills fired up furnaces and domestic prices surged to 19-month highs, according to Sanford C. Bernstein & Co. Average daily output may have eclipsed the previous high of about 2.31 million metric tons in June 2014, said Paul Gait, a senior analyst in London. Producers ramped up supply as demand rebounded and prices jumped as much as 69 percent from their November low, generating the best margins since 2009. China Seen Churning Out Most Steel Ever After Price Surge: Chart - Bloomberg ArcelorMittal repeated its 2016 guidance for core profit of above $4.5 billion. The group said an improved steel market would mean it needed more working capital, but it would still have a positive cash flow at the end of the year. ArcelorMittal slightly more upbeat about steel market | Reuters
05-10-2016, 12:09 PM
The stock is down 10% today, but this could be an opportunity..
By Shuli Ren
Credit Suisse is another investment bank that believes China’s steel demand will remain robust for a while. “Chinese demand could surprise at 5-10% in 2016 (vs house forecasts of -2%) and the ex. China recovery is likely to be more robust than most investors fear given the extent of destocking in the last 19 months and protectionism in place limiting export flows,” according toCredit Suisse steel analyst Mike Shillaker. Australian iron ore miner Fortescue Metals (FMG.Australia) has rallied 73% in three months but retraced 11% last week. This rally is not excessive because Fortescue Metals is no longer a credit risk. Analyst Paul McTaggart wrote:
Iron ore ended last week at $60 a ton. Trading at 3.5 times EV/EBITDA and with 28% free-cash-flow yield, Fortescue is reasonably priced. Credit Suisse estimates that if iron ore remains at the current $60/ton level till the end of 2018, Fortescue Metals is worth 4.07 Australian dollars a share based on discounted cash flow analysis. The bank raised its price target to A$3.50. Fortescue Metals fell 2.1% to A$3.04 today, as iron ore futures listed in Dalian, China tumbled today after disappointing April imports data. See also my earlier blogs “Goldman: Steel, Iron Ore Rally May Last Through Q2” and “China’s Iron Ore Futures Tumble As April Trade Data Disappoints“
05-10-2016, 12:11 PM
By Shuli Ren
Goldman Sachs raised its second-quarter iron ore price forecast by 47% to $55 per tonne last Friday, saying that the current rally may last through the rest of the quarter. Iron ore prices fell 2% to trade at $60.1 per tonne last week. This morning, Dalian iron ore futures tumbled 5.9%. This is Goldman’s justification:
The equity market is not buying into this argument today. Steel stocks tumbled 4.5% in mainland China this morning, according to data provider Wind. Australia’s BHP Billiton(BHP.Australia/BHP) fell 2.6%, Rio Tinto (RIO.Australia/RIO) dropped 3.7% and Fortescue Metals (FMG.Australia) fell 3.2%.
05-18-2016, 11:19 AM
Steel prices in China rebounded in the first four months after five years of losses, lifted by credit easing and an improvement in the property market as the government sought to shore up growth. Speculators fueled the bonanza in the belief that economic stimulus and industrial reforms would drive up demand and curb supply. At the end of April, regulators and exchanges moved to cool the frenzy and prices have since receded. China’s Record Daily Steel Output Bodes Ill for World Rivals - Bloomberg China’s record daily output in April bodes ill for an embattled global steel industry already reeling from a deluge of exports from the world’s top producer. Crude steel output over the month rose 0.5 percent to 69.42 million metric tons from a year earlier, the National Bureau of Statistics said on Saturday. The gains came after mills ramped up production to take advantage of a spurt higher in prices that has given them the best profits this decade. While below March’s record monthly figure of 70.65 million tons, the daily rate of 2.314 million tons was higher due to fewer producing days and surpassed the previous best set in June 2014. “Given how high margins went, we’ve been expecting to see a supply response like this,” Ian Roper, Singapore-based analyst at Macquarie Group Ltd., said in a WeChat message. “Chinese mills will likely look back to the export market as domestic oversupply reappears.” China’s Record Daily Steel Output Bodes Ill for World Rivals - Bloomberg The US raised its import duties on Chinese steelmakers by more than five-fold after accusing them of selling their products below market prices. The taxes specifically apply to Chinese-made cold-rolled flat steel, which is used in car manufacturing, shipping containers and construction. The US Commerce Department ruling comes amid heightened trade tensions between the two sides over several products, including chicken parts. US slaps China steel imports with five-fold tax increase - BBC News
05-18-2016, 10:27 PM
President Xi Jinping has said cutting overcapacity in ailing industries such as steel is an essential part of the government’s “supply-side” economic reforms. An unidentified “authoritative figure” was also quoted in a prominent article in the Communist Party mouthpiece the People’s Daily on Monday renewing calls to terminate “zombie companies”. Haixin, however, is not the only “zombie” steel firming coming back from the dead. As China pumped unprecedented amounts of credit to boost growth in the first quarter, many steel plants are back on stream to take advantage of a rise in steel prices. China's 'zombie' steel firms are coming back from the dead - Business Insider
05-19-2016, 02:04 AM
Analysts expect steel companies to report higher EBITDA in 2Q16. The biggest rise is expected for U.S. Steel Corporation (X), which is expected to post EBITDA of $103 million in 2Q16 compared to EBITDA of -$107 million in 1Q16. Along with spot sales, some of U.S. Steel’s contract sales will also benefit from higher spot prices. 23% of U.S. Steel’s flat-rolled shipments have a quarterly reset, while 13% have a monthly reset. As these sales are reset to higher prices, U.S. Steel’s EBITDA could improve significantly in 2Q16 and beyond. Why Analysts Think Steel Companies' Profits Could Rise in 2Q16 - Market Realist
06-06-2016, 10:23 PM
U.K. Prime Minister David Cameron told reporters on Wednesday before his plane landed for the Group of Seven summit in Ise-Shima, central Japan, that Europe’s anti-dumping actions against Chinese steel have been effective. European Commission President Jean-Claude Juncker, meanwhile, told reporters in Japan on Thursday that Chinese steel overcapacity is a "general problem" and Europe can’t afford to be "defenseless" against distorted markets. "This is affecting all our countries -- we have 22 steel-producing countries in the European Union and all the countries having steel industries on their territories have the right to defend their industry," said Juncker, the former prime minister of Luxembourg. China Steel Glut Tops G-7 Chatter as Leaders Meet in Japan - Bloomberg ArcelorMittal SA, the world’s biggest steel producer, climbed on speculation that the European Commission may extend its anti-dumping investigation on imports of hot-rolled coil to more countries. ArcelorMittal shares added 6.6 percent to 4.31 euros as of 11:16 a.m. in Amsterdam, reaching the highest level in two weeks. The stock has rallied 12 percent in the past three days. ArcelorMittal Climbs on Signs EU Trade Case on Steel May Widen - Bloomberg Iron ore is at risk of losing all of this year’s gains. Ore with 62 percent content has sunk to $48.40 a ton after posting the biggest monthly loss in about five years in May, according to Metal Bulletin Ltd. The collapse has left prices that topped $70 in April less than $5 above 2015’s close. Iron Ore at Risk of Losing All of 2016’s Gains as Rout Deepens - Bloomberg
06-08-2016, 10:38 PM
China pledged yesterday to rein in excess steel output and work with the US to enforce sanctions against North Korea, but there was no progress on the simmering tensions in the South China Sea. The pledge was made as China and the United States wrapped up their two-day annual Strategic and Economic Dialogue, labeled by officials as most productive in years despite many divisions. China and the US have agreed to tackle the steel glut - Business Insider Iron ore may take longer to bottom out as China steps up efforts to support the economy and as miners’ costs may climb, according to Citigroup Inc., which raised its forecasts by as much as 21 percent. The raw material is expected to trade at $48 a metric ton in the third quarter and $46 in the final three months, compared with previous estimates of $46 and $38, Citigroup said in a report Tuesday. Prices will average $49 this year and $42 the year after, before sinking to $38 through 2019, it said. After three years of sliding prices, iron ore has advanced in 2016 as China’s steel output rose to a record and policy makers said they’d support economic growth, catching many analysts off guard who were forecasting a fourth year of losses. The demand revival spurred a speculative rally that boosted prices in the three months to April. Citigroup Raises Iron Ore Outlook as China Demand ‘May Surprise’ - Bloomberg The four-year bear market that pushed commodities to the lowest level in a quarter century is coming to end as supply constraints drive a recovery in everything from soybeans to zinc. The Bloomberg Commodity Index, which tracks returns from 22 raw materials, is on track to close more than 20 percent above its low on Jan. 20, meeting the common definition of a bull market. While the index has come close to breaking out of the bear market that began at the end of 2011, it has never sustained a rally long enough, until now. It’s still down about 50 percent from the high reached in that year. Commodities Set to Break Into Bull Market After Four-Year Rout - Bloomberg |
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