Metals, Mining Q4 Results Preview - Steel Margins Under Pressure; Base Metals Shine: Axis Securities

Axis Securities Report

China’s demand uncertainty continues to linger as its property sector continues to remain sluggish. China’s steel demand remains slower than expected. China’s 3MMA YoY growth in ‘floor space started’ fell to -9.9% in December 2023.

However, continued policy support has led to the easing of this fall, as the floor space started has slowly recovered from -45% YoY in August 2022 to -9.9% in Dec-23.

According to the China Iron and Steel Association, the total steel inventory of key enterprises in mid-March-24 stood at 19.5 million tonne, up by 9.7 kt compared to early March-24.

Hot rolled coil prices in China have corrected by 8% since Jan-24 to $535/tonne. Iron ore inventory at Chinese ports remained elevated at 142 mt as of April 03, 2024. Iron ore prices traded below $100/tonne on Apr 01, 2024, at a 10-month low level due to lower steel demand and increased supply from Australia.

Coking coal prices have also eased from the peak of $367/t in Oct-23 to spot at $245/tonne, offering some respite to steel spot spreads.

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