Chinese steel prices have been on a downtrend since 2013, sliding to a 20-year low of 2,036 yuan per metric ton on July 9. This shows the strength of underlying demand in its economy.
China’s final reading of the manufacturing PMI, provided by HSBC on June 30, came in at 49.4—below the preliminary reading of 49.6.
China’s iron ore imports in June came in at 74.96 million tons, 5.8% higher than the previous month and 0.5% higher than the value a year earlier.
China’s iron ore port inventory is a key indicator that reflects the supply and demand balance, as well as the safety net and imbalance between the iron ore supply and the steel mill demand.
While the proportion of Brazil’s iron ore exports is declining in Chinese consumption, the absolute value of Brazil’s shipments is quite high.
Iron ore exports from Port Hedland totaled 38.4 million tons in June, compared with 38 million tons in May. This is a jump of 14.3% year-over-year and 1.1% month-over-month.
Iron ore prices came under renewed pressure for the week ending July 10. On July 8, iron ore prices tumbled to $47 per ton, which is close to a decade-low value.
US auto sales are still going strong. Higher vehicle sales bode well for US copper demand.
In June, passenger car sales declined by 3.2% year-over-year—the first annual decline in China’s car sales since February 2013.
Over the last month, Greek debt worries and China’s stock market crash have weighed heavily on commodity prices, which are overly sensitive to Chinese data.
In the first five months of 2015, China’s refined copper imports have declined by 12% year-over-year. The imports of copper scrap have also been on a downtrend.
Chinese copper inventory tends to build up toward the start of the year. As copper end users ramp up their production after the lunar New Year holidays, inventory levels start to decline.
On July 13, LME on-warrant copper inventory stood at 288,250 tons—a whisker shy of their 2015 high of 290,125 tons.
On July 13, copper for immediate delivery was quoted at $5,606 per metric ton on the London Metal Exchange. Copper prices rose by roughly 1% on a possible Greek-debt deal.
Recently, Freeport-McMoRan (FCX) hit a 52-week low, falling to $16 per share on intraday trading. Incidentally, copper prices also hit a six-year low around the same time.
Currently, Alcoa trades at a forward EV/EBITDA of 6.20—19% below its five-year average.
In this series, we’ve analyzed Alcoa’s (AA) 2Q15 financial performance. Now, we’ll discuss the aluminum industry’s outlook as Alcoa described it.
Reducing leverage ratios has been a prime focus area for Alcoa.
Strong aerospace demand works to Alcoa’s advantage. According to Alcoa, there’s a nine-year production backlog for commercial aircraft.
Now, we’ll explore how Alcoa’s GRP (Global Rolled Products) segment fared in 2Q.