Pakistan Metals_Global Floods disrupt metal supply chains - price volatility expected, (AKD Daily, Aug 05, 2021)
AKD Daily
Pakistan Metals: Global Floods disrupt metal supply chains - price volatility expected,
- Heavy rains and floods in China and Europe have recently dominated headlines around the globe — we map out regions most affected and potential economic fallout on commodities. Most-affected, China’s Henan province, is home to one-tenth of country’s total agriculture output and engulfs 36% of China’s total primary Lead capacity (used in batteries etc.) and 15% of recycled Lead capacity.
- Moving to Europe, where Western Europe (Germany, Belgium, and the Netherlands) embraced highest rainfall in decades, causing transportation and production disruption in the Rhine valley – a major shipping route for commodities in Northern Europe. Moreover, Rhineland-Palatinate and North Rhine-Westphalia region (areas most hit in Germany) are home to manufacturing facilities of top steel producers.
- Disruptions in steel supply chain have begun to impact raw material prices with scrap/HRC prices down 5.1%/2.5%. We see positive (through potential inventory gains in medium run) to neutral impact on long steel manufacturers where every US$5 drop in scrap prices has a positive impact of PkR0.9/sh and PkR1.0/sh on ASTL and MUGHAL respectively in FY22 (assuming no change in rebar prices). CRC-HRC spread has also improved to US$83/ton vs. US$50/ton in Jul’21 — Positive for ISL and ASL.
- Lead prices are +7% from mid-Jul’21 which bodes negatively on margins of local battery manufacturers with limited pass-on ability. To highlight, every 5% change in lead prices reduces gross margin of EXIDE/ATBA by 250/190bps.
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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