>Metals & Mining Sector (CITI)

METALS & MINING MONITOR
INDUSTRY FOCUS

Broad Declines in Pricing and Micro Indicators

* Steel Prices – Pricing fell globally with US HRC declining 4% to $500/ton and while US rebar is still listed at $575/ton, import rebar offers fell 5% to $455/ton. European and China HRC fell 4-5% and China rebar fell 6%. US OCTG prices maintained their downward trajectory falling 8% to $2,160/ton. On the input side, European shredded scrap fell 27% to $180/ton and China iron ore declined 5% to $81/tonne.

* Steel Indicators – Steel mill utilization slipped to 41.8% from 45.4% the prior week. The Feb ISM Manufacturing index will be issued on Monday (Mar 2nd) at 10AM ET. Historically, this has been one of the most reliable leading indicators (by ~3 months) for steel demand and mill utilization rate.

* Coal Prices – Domestic coal prices are unchanged due to lack of activity with CApp indicated at $68.20/ton, IL Basin at $55/ton, PRB at $13/ton and NApp at $66/ton. However, trade press Platts noted that small spot volumes of noncompliance (1.5 lb SO2) CApp is available at a discount (adjusted for grade), which would imply a compliance CApp coal value of ~$65/ton. Internationally, seaborne thermal (10,800 btu/lb) declined by $10/tonne to $58/tonne.

* Coal Indicators – For the week ending Feb 21st, US production increased by 0.3% YoY and electricity generation declined by 4.2%. With colder weather subsiding on a national basis, the impact of the industrial slowdown on electricity demand is more evident. YTD, coal production has declined 1.0% vs a 1.5% decline in electricity generation.

* Specialty Metals – Global passenger load factors (PLF) continued to decline in January, falling 2.3% YoY to 72.8% suggesting weaker demand for planes and metals such as titanium and nickel alloys. Developing markets were the hardest hit with Asia Pacific PLF falling 3.5% YoY to 73.5% and the Middle East dropped 4.7% YoY to 71.9%. Ferrotitanium dropped 6.2% to $1.36/lb.

To see full report: Metal Sector