Supply starting to resume amid the demand recovery
<News Alert> Supply starting to resume amid the demand recovery (5 August 2022)
- Chinese was increasing export of both alumina and aluminium
- 17 steel mills to resume rebar production
- Southern and Central market sales picking up
- Top picks: BUY CHALCO (2600 HK), CNBM (3323 HK), Ganfeng (1772 HK); and SELL CR Cement (1313 HK), Angang (347 HK)
- Aluminum. News reporting China was lifting exports of alumina to Russia after Australia’s ban. Also, China has stepped up exports of aluminium to Europe, where smelters are struggling with the power price surge resulting from reduced flows of Russian gas. Company-wise, RUSAL had completed its first domestic CNY corporate bond issuance raising RMB4bn at coupon rate 3.9%.
- Steel. Industry source reported 17 out of 137 steel mills surveyed are planning to resume rebar steel production with an estimated supply increase of 243,800 tons in total, after the latest steel products inventory decline (down 1.0mn tons last week) and prices decline moderating. Non-peak hours rebar production from electric arc furnace could make profit of RMB200 per ton.
- Coal. National Energy Administration said to monitor the long-term contract fulfillment level. For July, Qinhuangdao 5,500Cal annual long-term contract has lowered to RMB719 per ton, a RMB6 decline from the beginning of year. That help reducing power plant operation pressure.
- Cement. News said Qingdao banks ask to re-issue mortgage upon property topping out. Cement products’ sales delivery starting to pick up in the Southern and Central China regions. Also, silo level has marginally declined. And cement price has also stopped declining last week, but the price spread between cement and coal products is still below that in 3Q21.
- Top picks: Short-term geopolitical tension is clouding the downstream demand recovery. BUY CHALCO (2600 HK) on rising synergy providing from Yunnan Aluminium, BUY CNBM (3323 HK) and Ganfeng (1772 HK) on better revenue growth prospect; SELL CR Cement (1313 HK) and Angang (347 HK) on more severe margin pressure.
