>Metals Update (MOTILAL OSWAL)

Steel prices continue to weaken due to poor demand. Chinese demand has weakened in the last one month, adding to uncertainties. However, Indian steel producers (Tata Steel pg 18 and JSW steel pg 19) have posted strong sales in January and February, and prices have been stable. Prices may fall when cheaper imports arrive in coming months.

● Indian spot iron ore prices have plunged further by US$8-10 to US$67/ ton cfr China for the 63.5% grade. Prices are inching further downward to the lows of November 2008.

● Benchmark contracts for iron ore and coking coal remain unsettled due to uncertainties. Though, a greater number of non-traditional deals are taking place ahead of settlement, for coking coal.

● Prices of pig iron, coke and scrap have come under further pressure.

● India has imposed safeguards due to value-added products of Aluminium, which will mainly benefit Hindalco. Novelis has closed its UK mills due to poor demand.

● Vedanta Aluminums’ (Sterlite Industries’ associate) massive US$9b and Hindustan Zinc’s US$900m capex is on schedule. US$1.7b ASARCO’s purchase payback is contingent upon copper prices being > US$3750/ ton.

● JSPL has been allotted 1.5b tons of coal block for US$8b coal to liquid project to produce 80,000bpd of oil. JSPL remains our top pick.

To see full report: METAL SECTOR