Pakistan Metal_Global metal prices are in place, (AKD Daily, Jun 16, 2022)
AKD Daily
Pakistan Metal: Global metal prices are in place
- International aluminum/zinc/lead/nickel prices have started mean reversion, contracting 35/19/17/48% from their peak in Mar-Apr’22, depicting signs of metal commodities upcycle losing stream. Moreover, scrap has also accompanied these industrial metals where it has lost 45% from its peak of US$700/ton to US$385/ton which bodes well for local long steel manufacturers (MUGHAL, ASTL, AGHA, and ITTEFAQ).
- On the local front, rebar prices have increased further by PkR14-15K/ton to PkR229-230K/ton in Jun’22 amid soaring PkR/US$ depreciation and rising fuel & power costs. Current prices reflect scrap prices of US$600-610/ton at PkR/US$ 198, as per our calculation, if margins are to sustain at 3QFY22 levels. To note, Spot scrap prices usually have a 45-60 days lagged period.
- In contrast to key industrial metals, copper has only contracted 13% from its peak of US$10,700/ton in Mar’22 to currently hover around US$9,263/ton vs its long-term avg. of US$6,700/ton, signifying the firm demand and supply crunch persisting with the red metal where smelters coming back from seasonal maintenance will keep demand uptick.
- CRC-HRC spread is consolidating, currently trading at US$81/ton compared to a low/high of US$64/142/ton witnessed in Mar’22/Oct’21 vs last 5yr avg. of US$89.7/ton. To note, HRC prices have regressed 7.2%MoM vs 5.7%MoM for CRC prices in Jun’22, indicating a global slowdown in raw material prices and steel production.
- With the overall macroeconomic outlook being grim, the steel sector is also expected to remain under pressure, however, in the case of MUGHAL (TP: Pkr94/sh, upside 65%) the risk profile is somewhat reduced due to its diversified product portfolio and dollar-denominated income from the non-ferrous segment.
AKD Research
Mughal Iron & Steel Industries Ltd. Mughal Iron & Steel Industries Limited is engaged in manufacturing and trading of mild steel products. The Company is engaged in producing steel in the long-rolled steel products, which has a capacity of 688,000 metric/tons of re-rolled steel per annum. The Company is engaged in multidimensional activities from making billets of mild steel, spring steel, deformed bar, re-bar, cold twisted rebar and a range of sections, such as I-beams, L-sections, C-section, H-beams and T-bar. The Company offers its products under various categories, including Smelting, such as Ferro Silicomanganese, Ferro Chrome and Ferro Silicon; Billet, such as Mild Carbon Billets, Spring Steels, Austentic Stainless Steel, Ferrite Stainless steels and Alloys Steels; Bars, including Deformed Bars, Re-inforcement Bars and Thermax Bars; Beams, including I Beams (Girders), Angle Section (L Section), T Bar (T section) and C Channel, and Grade and Specifications, including ASTM A 615 G-40 and ASTM A 321.
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AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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