Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Commodities

<ul>
<li>Iron ore has remained rangebound between 95 and 130 USD/ton for three years, with cost-curve support kicking in on the higher end of the cost curve at around 100 USD/ton. </li>
<li>Coking coal prices are expected to bounce due to the Anglo incident, and we believe the 65-62 spread will benefit, moving out of its mid-teens band. </li>
<li>We like iron condors (set up details in the insight) and high-grade ore producers <a href="https://www.smartkarma.com/entities/rio-tinto-ltd" target="_blank" data-smartkarma-citation="entities:13:1" rel="noopener">Rio Tinto Ltd (RIO AU)</a>, <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale (VALE US)</a>.</li>
</ul>


Iron ore has remained rangebound between 95 and 130 USD/ton for three years, with cost-curve support kicking in on the higher end of the cost curve at around 100 USD/ton. 
Coking coal prices are expected to bounce due to the Anglo incident, and we believe the 65-62 spread will benefit, moving out of its mid-teens band. 
We like iron condors (set up details in the insight) and high-grade ore producers Rio Tinto Ltd (RIO AU), Vale (VALE US).


Iron Ore Tracker July 4th, 2024: Prices Rangebound, Iron Condors Anyone?

Agri | Weather | Energy Transition, Mint Finance

Srinidhi Raghavendra

Agri | Weather | Energy Transition

Deep Fundamental Analysis

Mint Finance

Mint Finance's investment research blends deep fundamental analysis with technical & quant insights. Investment strategies straddle across multiple asset classes with risk management embedded into every trade to deliver an outsized reward-to-risk ratio.

Mint Finance's research is centered around three key themes. First, energy transition and climate change. Second, artificial intelligence. Third, shifting world order with its impact across politics and monetary economics.

<ul>
<li>Chinese real estate investments fell 10.1% in the first five months of 2024 YoY. New home prices fell at the fastest pace in more than 9.5 years in May.</li>
<li>Fresh bank lending in China rebounded well expectations in May. Chinese banks issued 950B yuan (v/s 1.36T yuan issued last May) in new loans last month.</li>
<li>China's consumer inflation held flat in May amid feeble domestic demand, uneven economic recovery, and consumer confidence weakness.</li>
</ul>


Chinese real estate investments fell 10.1% in the first five months of 2024 YoY. New home prices fell at the fastest pace in more than 9.5 years in May.
Fresh bank lending in China rebounded well expectations in May. Chinese banks issued 950B yuan (v/s 1.36T yuan issued last May) in new loans last month.
China's consumer inflation held flat in May amid feeble domestic demand, uneven economic recovery, and consumer confidence weakness.


Persistent Weakness in Chinese Real Estate Will Drag Iron Ore Prices Down

<ul>
<li>SGX Iron Ore prices exhibit seasonality. For select six months being long Iron Ore combined with short positions during other months deliver positive P&amp;L based on back tests. </li>
<li>In line with prices, realised volatility exhibits seasonality too. Options strategies can exploit this to deliver superior alpha &amp; higher sharpe ratio.</li>
<li>Averages confound extreme variances. Monthly iron ore futures price returns are less volatile during the months of December, February, June, October, &amp; March based on range.</li>
</ul>


SGX Iron Ore prices exhibit seasonality. For select six months being long Iron Ore combined with short positions during other months deliver positive P&amp;L based on back tests. 
In line with prices, realised volatility exhibits seasonality too. Options strategies can exploit this to deliver superior alpha &amp; higher sharpe ratio.
Averages confound extreme variances. Monthly iron ore futures price returns are less volatile during the months of December, February, June, October, &amp; March based on range.


Harvesting Seasonality in Iron Ore Prices Induced by Weather, Inventory Restocking, and Holidays

<ul>
<li>
<a href="https://www.smartkarma.com/entities/champion-iron-ltd" target="_blank" data-smartkarma-citation="entities:19734:1" rel="noopener">Champion Iron (CIA AU)</a> reported an inline result for FY24, with revenue/profits up 9%/16% YoY.  Q4 revenue/profits were -28%YoY/-73%YoY due to lower pricing on 60% of volumes in transit. </li>
<li>The company-guided production volumes have reached the annualized 15 mnt mark, but logistics continued to be challenging in Q1. Easing is expected in August, and base case a 1.5-year destock.</li>
<li>The name carries some risks trading at 7x PE FY25 (March end), but it could be one to watch in case the 65-62 spread widens.</li>
</ul>



Champion Iron (CIA AU) reported an inline result for FY24, with revenue/profits up 9%/16% YoY.  Q4 revenue/profits were -28%YoY/-73%YoY due to lower pricing on 60% of volumes in transit. 
The company-guided production volumes have reached the annualized 15 mnt mark, but logistics continued to be challenging in Q1. Easing is expected in August, and base case a 1.5-year destock.
The name carries some risks trading at 7x PE FY25 (March end), but it could be one to watch in case the 65-62 spread widens.


Champion Iron (CIA AU): Q4 Results Update and Future Outlook

<ul>
<li>Iron ore continued to lounge around the 117 USD/ton levels, but there is increased optimism for <a href="https://www.smartkarma.com/insights/iron-ore-and-the-china-property-auto-stimulus-angle" target="_blank" data-smartkarma-citation="insights:139280" rel="noopener">Iron Ore and The China Property/Auto Stimulus Angle</a> </li>
<li>Spreads between 65 and 62 widened to 13.8 USD/ton from 12.6 USD/ton last week, and we expect this spread to build further. </li>
<li>The street now widely anticipates the China TSF number between 9-15th of May, which is expected to grow in April at 14.5% YoY on consensus estimates to 1.4 trillion Yuan.</li>
</ul>


Iron ore continued to lounge around the 117 USD/ton levels, but there is increased optimism for Iron Ore and The China Property/Auto Stimulus Angle 
Spreads between 65 and 62 widened to 13.8 USD/ton from 12.6 USD/ton last week, and we expect this spread to build further. 
The street now widely anticipates the China TSF number between 9-15th of May, which is expected to grow in April at 14.5% YoY on consensus estimates to 1.4 trillion Yuan.


Iron Ore: 117 USD/Ton and Upwards to 130 Short-Term, Catalysts To Watch and Our Stock Screener

Australia

Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in color from dark grey, bright yellow, deep purple, to rusty red. The iron itself is usually found in the form of magnetite (Fe3O4, 72.4% Fe), hematite (Fe2O3, 69.9% Fe), goethite (FeO(OH), 62.9% Fe), limonite (FeO(OH).n(H2O)) or siderite (FeCO3, 48.2% Fe).

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Iron Ore (IRON ORE COMDTY)

Iron Ore Tracker July 4th, 2024: Prices Rangebound, Iron Condors Anyone?

With the latest 10% bounce in iron ore prices and coking coal prices, we provide actionable ideas to play iron ore in equities/options etc.

Sameer Taneja

Persistent Weakness in Chinese Real Estate Will Drag Iron Ore Prices Down

Chinese home prices fell fastest in 9.5 years in May. Domestic loan issuances were well below lowered expectations. Inventory remains elevated....

Mint Finance

Harvesting Seasonality in Iron Ore Prices Induced by Weather, Inventory Restocking, and Holidays

Iron ore futures prices exhibit seasonality. Harnessing seasonality using SGX Iron Ore Futures delivers a success rate of 63% (positive P&L in 57...

Mint Finance

Champion Iron (CIA AU): Q4 Results Update and Future Outlook

We summarize the Q4 FY24/FY24 financial results for Champion Iron (CIA AU) and the post-results conference call. The company is set to have a...

Sameer Taneja

Iron Ore: 117 USD/Ton and Upwards to 130 Short-Term, Catalysts To Watch and Our Stock Screener

We summarize the catalysts that will take iron ore higher from 117 USD/ton to 130 USD/ton in the short term. We also provide readers with our iron...

Sameer Taneja

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