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Q4FY11 iron ore contract prices up 6.3% q-o-q

Motilal Oswal | 13 Dec, 2010  | Follow Author | Add to my Favourites 
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Q4FY11 iron ore contract prices up 6.3% q-o-q, Indian HRC prices improve

- Rio Tinto recently agreed to a 6.3% q-o-q hike in iron ore price contracts with Chinese mills for 4QFY11, in line with our expectations.

- China’s iron ore imports rebounded to 57.4mt (up 12% y-o-y) in November, reaching their highest level since March 2010, which supported spot iron ore prices. Iron ore prices on the spot market are firm at US$170/dmt for 63% iron grade.

- Indian HRC prices rebounded from their recent lows on account of a pick-up in demand and due to a supply correction caused by a continued shut down at Ispat Industries. Our interaction with industry officials indicates expectations of gradual improvement in steel markets. With buoyant end-user demand in India, steel producers are pushing for higher prices.

- Scrap prices also surged globally in the past week, due to higher demand from southeast Asia and the EU. This is expected to push steel prices higher as producers will try to maintain margins.

- Tata Steel recently received environmental clearance from the ministry of environment and forests to expand capacity at the Katamati iron ore mine from 2mtpa to 8mtpa. We are positive about Tata Steel India but expect EBITDA to come under pressure at Tata Steel Europe in 3QFY11.

- JSW Steel, Sterlite Industries, Tata Sponge and Prakash Industries trade at attractive valuations.

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About Motilal Oswal

Motilal Oswal was founded in 1987 as a small sub-broking unit, with just two people running the show. Today it has a 2000 member team with a networth of Rs7 bn and market capitalization as of March 31, 2008 at Rs19 bn.


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