Morning Bites (part 1)

🔗CISA mills' daily crude steel production during early August was 2.15mnt, a 0.8% increase from the previous ten days (also a 10.8% jump YoY). Meanwhile, local steel inventories grew 10.8% over the same period (-5.9% YoY). Although the crude steel output growth has followed July’s dynamics, we keep in mind Beijing’s intention not to exceed the 2022 production levels. Overall, new support measures for the domestic real estate segment is still the main potential trigger for steel demand growth, as China represents ~52% of global steel consumption

#steel
https://metals-wire.com/sector/Steel

Morning Bites (part 2)

💎India’s rough diamond net imports dropped 49% YoY in July, continuing the decline seen since December 2022 (except the 7% YoY growth in April). Meanwhile, India’s polished diamond net exports dropped 44% YoY in July (after the -33% YoY in June), while synthetic rough diamond net imports fell 16% YoY (vs. -48% YoY in June). The share of lab-grown net rough imports in natural diamond imports was 10% in July, slightly more than the 8% in the same month last year. The weak and still deteriorating demand from India’s midstream (~95% of world polished stones supply) underpins our cautious view on the global diamond market. To recap, GJEPC expects India's gem and jewellery exports to drop 10-15% YoY in 2023 (the YTD decline is already steeper, at 24% YoY)

#diamonds  
https://metals-wire.com/sector/Diamonds

Morning Bites

💎 De Beers has allowed sightholders to defer rough purchases at cycles 8-10, Rapaport reports, citing a message from the miner. Hence, sightholders can avoid buying parts of their allocations (25-50%) for >1ct diamonds until the end of 2023. Meanwhile, De Beers is also maintaining its buyback policy, which allows clients to sell 10-30% of their purchases back to the company. The decision was made amid sluggish consumer demand and high midstream stockpiles. This underpins our cautious view on the diamond sector, which remains stressed by adverse macroeconomic conditions globally

💍China’s jewellery and watch retail sales declined 4% YoY in July, following the 14% YoY drop in June. According to Rapaport, China’s post-lockdown recovery did not extend to diamonds. On our numbers, the country represents ~15% of the world's gem-set jewellery trade

#diamonds 
https://metals-wire.com/sector/Diamonds

SQM 2Q23 results – materially below forecasts

📝SQM's 2Q23 revenues came in weaker than the market had estimated (-10% vs. the consensus and -14% vs. us), mostly affected by lower realised prices. Hence, the EBITDA dynamics were also disappointing (-17% vs. consensus and -18% vs. us)

⛏According to the company, its FY23 lithium production is set to be 180-190kt (+18% YoY), meeting the forecasted >20% growth in global Li market demand

❗️Overall, at spot prices, we expect SQM’s 3Q23 EBITDA to show a single-digit improvement QoQ, amid the guided production increase in 2H23. However, the positive effect is likely to be limited by Li prices, which are currently ~17% lower than the 2Q23 average

#SQM #lithium
https://metals-wire.com:3000/company/SQM_US/

Week ahead data releases in M&M

Several companies are due to report their 2Q23/1H23 financials this week. Regarding the major miners (BHP and South32), our EBITDA forecasts are more upbeat than the consensus estimates

#reporting_season
https://metals-wire.com:3000/events

Morning Bites

🔗China’s steel mills are set to lower production in 2H23, SteelOrbis reports, citing market sources. For instance, producers in the Jiangsu (~11% of local steel output) and Shandong provinces (~8%) might cut utilisation rates by 20-30% and 10-15%, respectively, vs. 1H23. The city of Tangshan (13% of domestic steel supply) has also recently tightened production controls. Overall, these measures are likely to help China to keep steel production below the 2022 level: in 7mo23 it was still +3% YoY. We remind readers that the country accounts for ~57% of global crude steel supply

#steel  
https://metals-wire.com/sector/Steel

BHP 1H23 results - EBITDA underperforms again

📝BHP's CY 1H23 revenues broadly met market expectations (-3% vs. the consensus and -1% vs. us). However, EBITDA was below forecasts (-5% vs. consensus and -9% vs. us), affected by higher inflationary pressure (mostly in iron ore and coal segments) than we had anticipated

⛏According to BHP’s guidance, iron ore production is to grow ~1% YoY in FY24, while copper output is to gain up to 11% over the period

🛒The miner expects its FY24 copper (Escondida mine) cash costs to jump up to 20% YoY to USD 1.4-1.7/lb. Simultaneously, the figure for iron ore segment might stand at USD 17.4-18.9/t (vs. USD 17.8/t in FY23)

💰The BoD has declared a final dividend of USD 0.80/sh., implying a DY of some 2.9%

📌On our numbers, at spot, BHP's CY 2H23F EBITDA will decline in mid-single digits HoH, stressed by lower prices among the whole commodity basket

#BHP #iron_ore
https://metals-wire.com/company/BHP_AU/

Morning Bites (part 1)

🔗Global crude steel output rose 7% YoY in July to 159mnt, after being unchanged YoY in June, according to the World Steel Association. Meanwhile, China’s production jumped 12% YoY (vs. the flat dynamics seen in June), while ex-China steel output rose 1% YoY. Specifically, EU supply dropped 7% YoY (vs. -11% YoY in June), following the local energy crisis. US steel production inched up 1% YoY, while Russia’s steel output rose 6% YoY in July, after the 4% YoY increase in June. We note that China’s mills in the key steel making provinces (such as Hebei, Jiangsu and Shandong) might lower output in 2H23 in order to keep national steel production below the 2022 level: in 7mo23 it was still +3% YoY. To recap, the country represents ~57% of world crude steel supply

#steel  
https://metals-wire.com:3000/sector/Steel

Morning Bites (part 2)

☢️ Sweden is likely to lift the ban on uranium mining, The Times reports. According to the country’s Climate Minister, Romina Pourmokhtari, a majority within the Swedish Parliament supports the decision. Sweden (~2% of global nuclear generation in 2022) has recently announced plans to build at least ten new nuclear reactors by 2045 (in addition to the six reactors currently operating), as the demand for electricity might double in the coming decades. Overall, we do not expect any material volumes from Sweden to come into the market in the medium term: the country accounts for only 0.2% of global uranium resources, per SGU. At the same time, the growing interest in nuclear power might add a positive note to the sentiment on uranium in the long term, we believe

#uranium
https://metals-wire.com/sector/Uranium

Morning Bites (part 1)

🔗CISA mills' daily crude steel production during mid-August was 2.22mnt, a 2.9% increase from the previous ten days (also an 11.0% jump YoY). Meanwhile, local steel inventories grew 3.6% over the same period (-4.0% YoY). Although production is still growing YoY, Chinese mills in the top steel making provinces (such as Hebei, Jiangsu and Shandong) might lower their utilisation rates in 2H23, in order to keep output below the 2022 level: in 7mo23 it was still +3% YoY. To recap, China represents ~57% of global steel supply

#steel
https://metals-wire.com/sector/Steel

Morning Bites (part 2)

📉Russia’s gold output dropped 12.3% YoY in July, reversing from the 9.5% YoY growth in June, per Rosstat data. Despite some slowdown in production during July, Russia’s gold output was still +5.5% YoY in 7mo23. Overall, we maintain our positive outlook on the precious metal, amid strong physical gold demand and the rising cash costs of gold miners, as well as unfavorable macroeconomic conditions globally. Russia accounts for ~9% of the world's mined gold output

#gold
https://metals-wire.com/sector/Gold

Morning Bites

⚠️Another fatal accident at a coal mine in China threatens output growth, Bloomberg reports. On Monday, a gas explosion occurred at a mine in Shaanxi (one of the top three coal mining provinces in China), marking the worst industry accident since February, when 53 workers were buried after a landslide. As with that incident, the news from Shaanxi might trigger nationwide safety checks and add risks to domestic coal output - especially taking into account declining coal quality and frequent emergencies, per Bloomberg. Following the accident, the China Coal Transport and Distribution Association has cut an annual production forecast 2% to 4,600mnt. To recap, China boosted its coal production 10% YoY in 2020, and we believe that safety violations might have come along the way

#coal
https://metals-wire.com/sector/Coal

Week ahead data releases in M&M

Reporting season is drawing to a close, and several major miners are to publish their 2Q23/1H23 earnings this week. In particular, we are looking forward to the data from South African miners. Meantime, De Beers reports its Cycle 7 sales

#reporting_season
https://metals-wire.com:3000/events

Morning Bites

💎Petra Diamonds’ LFL rough prices at its August auction were down 4.3% vs. May. To recap, the June tender was postponed to August amid weak demand from India’s midstream. The decline was mostly driven by the 14% cut in 2-11ct diamonds’ LFL prices, while smaller stones saw only a 1-2% decrease. According to Petra CEO Richard Duffy, the rough diamond stocks of Indian cutters (~95% of global polished stones supply) have likely peaked and might decline in the near future, while the upcoming holiday period (Diwali, Thanksgiving, etc.) could well add a positive note to sales. However, we keep our cautious view on the diamond sector globally, given the adverse macroeconomic conditions and ongoing soft US sales (~50% of world gem-set jewellery trade)

#diamonds 
https://metals-wire.com/sector/Diamonds

Fortescue 1H23 results - adjusted EBITDA in line with consensus

📝Fortescue's CY 1H23 revenues have met market expectations. Adjusted EBITDA (ex. a USD 1bn impairment expense from Iron Bridge) also came broadly in line (+2% vs. the consensus and 4% above us). We note that the impairment reflects inflationary pressures and the timing of the project ramp-up

⛏According to the miner’s guidance, FY24 iron ore shipments are seen at 192-197mnt (vs. 192mnt in FY23). At the same time, Pilbara's C1 cost might grow 3-8% YoY to USD 18-19/t

❗️Company CEO Fiona Hick is leaving just six months after taking on the role. In our view, the recent series of departures among top managers is unfavourable for sentiment

💰The BoD has announced a final dividend of AUD 1.00/share, implying a good DY of 4.8%

📌At spot, Fortesque’s CY 2H23 Adjusted EBITDA might grow in the mid-single digits HoH, bolstered by potentially higher sales volumes

#FMG #iron_ore
https://metals-wire.com/company/FMG_AU/