Over 25-yrs in Global Materials & Soft Commodities

Charles Spencer

Equity Bottom-Up

Angang Steel Co Ltd (H) / Equity Bottom-Up

<ul class="">
<li>We believe overproduction and lower steel prices into 1H19 will lead to material downward revisions in Angang’s NTM EBITDA forecasts and its stock price.</li>
<li>We reiterate our earlier call to sell <a href="https://www.smartkarma.com/entities/203" target="_blank" data-smartkarma-citation="entities:203:1">Angang Steel Co Ltd (H) (347 HK)</a> and cut our PT to HK$5.00. </li>
<li>We take cold comfort from Vale’s recent comments that they “don’t see steel prices going back to historical [low] levels”.</li>
</ul>


We believe overproduction and lower steel prices into 1H19 will lead to material downward revisions in Angang’s NTM EBITDA forecasts and its stock price.
We reiterate our earlier call to sell Angang Steel Co Ltd (H) (347 HK) and cut our PT to HK$5.00. 
We take cold comfort from Vale’s recent comments that they “don’t see steel prices going back to historical [low] levels”.


Angang Steel: More Pain Ahead on Chinese Steel Overproduction.  PT Cut to HK$5

INVESTMENT VIEW: Despite having pushed out the timing on our call for a meaningful correction in steel prices, we remain Cautious on the outlook for Chinese steel earnings and Angang shares into 2019.  In addition, we see a number of headwinds, beyond pricing, challenging the sustainability in peak-of-cycle earnings.  Our <a href="https://www.smartkarma.com/entities/203" target="_blank" data-smartkarma-citation="entities:203:1">Angang Steel Co Ltd (H) (347 HK)</a> price target remains HK$6.50, but the timing of the correction is likely delayed into 4Q18. 
RECENT NEWS-FLOW MORE SUPPORTIVE…:  <a href="https://www.smartkarma.com/entities/203" target="_blank">Angang </a>shares…

INVESTMENT VIEW: Despite having pushed out the timing on our call for a meaningful correction in steel prices, we remain Cautious on the outlook for Chinese steel earnings and Angang shares into 2019.  In addition, we see a number of headwinds, beyond pricing, challenging the sustainability in peak-of-cycle earnings.  Our Angang Steel Co Ltd (H) (347 HK) price target remains HK$6.50, but the timing of the correction is likely delayed into 4Q18. 
RECENT NEWS-FLOW MORE SUPPORTIVE…:  Angang shares…

Policy Easing Pushes Out Our Correction Call, But Headwinds to Return into FY19

CHINA - Healthcare, Steel, Autos, Education, Research From Beijing

Scott Laprise/ 乐天虎

CHINA - Healthcare, Steel, Autos, Education

Maanshan Iron & Steel H / Equity Bottom-Up

<ul><li>This is our new monthly series to look at steel demand as a proxy for the Chinese economy.</li><li>We look at steel inventories and how they have changed since our last visit We look at steel prices in China and how they have changed.</li><li>We explain why the newsflow on steel is wrong and why you need to read our monthly on the ground steel reports.</li><li>We found very different activity this year compared to any other post-Chinese New Year.</li><li>We will give you our views on the stocks and what we see actually on the ground which is very different than what investors are reading in the news.</li></ul>

This is our new monthly series to look at steel demand as a proxy for the Chinese economy.We look at steel inventories and how they have changed since our last visit We look at steel prices in China and how they have changed.We explain why the newsflow on steel is wrong and why you need to read our monthly on the ground steel reports.We found very different activity this year compared to any other post-Chinese New Year.We will give you our views on the stocks and what we see actually on the ground which is very different than what investors are reading in the news.

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Thematic (Sector/Industry)

After meeting with steel and aluminum executives at the White House on March 1, President Donald Trump announced that he'll be enacting a 25% steel tariff next week. It is unclear, however, if this approach will be applied in a blanket fashion to all countries or only to a targeted list of countries. In its Feb. 16 Section 232 report, the blanket tariffs proposed by the U.S. Department of Commerce were 24% for all steel imports, which is less severe than the figures indicated by Trump on March…

After meeting with steel and aluminum executives at the White House on March 1, President Donald Trump announced that he'll be enacting a 25% steel tariff next week. It is unclear, however, if this approach will be applied in a blanket fashion to all countries or only to a targeted list of countries. In its Feb. 16 Section 232 report, the blanket tariffs proposed by the U.S. Department of Commerce were 24% for all steel imports, which is less severe than the figures indicated by Trump on March…

Minimal Impact on Our Asian Steel Coverage Following U.S.Steel Import Tariffs; FVEs Unchanged

<ul><li>Wire rode inventory up and rebar inventory lower than last visit last August 2017.</li><li>Only one truck we found at the traders showing little activity.</li><li>At the traders,  wire rod was around RMB 3900-4000 which was lower than last month.</li><li>HRC’s price is around RMB 4400.</li><li>Most of the small traders said they had no inventory going into Chinese New Year.</li></ul><ul><li>Bigger traders are still busy.</li><li>We will visit again after Chinese New Year in March when we expect to see the construction sector pick up again in the north of China.</li><li>Angang has shot up in January eliminating the long product premium of Magang.</li></ul>

Wire rode inventory up and rebar inventory lower than last visit last August 2017.Only one truck we found at the traders showing little activity.At the traders,  wire rod was around RMB 3900-4000 which was lower than last month.HRC’s price is around RMB 4400.Most of the small traders said they had no inventory going into Chinese New Year.Bigger traders are still busy.We will visit again after Chinese New Year in March when we expect to see the construction sector pick up again in the north of China.Angang has shot up in January eliminating the long product premium of Magang.

China

Baoshan Iron & Steel Co., Ltd. manufactures and markets a variety of iron and steel products including cold rolled plates and coils, hot rolled plates and coils, seamless steel tubes, high-speed wire rods, and steel billets.  The company also operates in related energy production businesses.

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Baoshan Iron & Steel Co A (600019 CH)

Angang Steel: More Pain Ahead on Chinese Steel Overproduction. PT Cut to HK$5

We believe overproduction and lower steel prices into 1H19 will lead to material downward revisions in Angang’s NTM EBITDA forecasts and its stock...

Charles Spencer

Policy Easing Pushes Out Our Correction Call, But Headwinds to Return into FY19

INVESTMENT VIEW:Despite having pushed out the timing on our call for a meaningful correction in steel prices, we remain Cautious on the outlook for...

Charles Spencer

CHINA Steel Trader Visit - 3rd Visit

This is our new monthly series to look at steel demand as a proxy for the Chinese economy. We look at steel inventories and how they have changed...

Scott Laprise/ 乐天虎

Minimal Impact on Our Asian Steel Coverage Following U.S.Steel Import Tariffs; FVEs Unchanged

After meeting with steel and aluminum executives at the White House on March 1, President Donald Trump announced that he'll be enacting a 25% steel...

Morningstar, Inc.

Beijing Steel Trader Visit in Jan 2018

Wire rode inventory up and rebar inventory lower than last visit last August 2017. Only one truck we found at the traders showing little...

Scott Laprise/ 乐天虎

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