Evraz - Closing Long Trade Idea, Downgrading to HOLD

We close our trade idea to buy Evraz, as steel prices have already reached our 2021 forecasts thanks to strong infrastructure-led stimulus in China. Moreover, coking coal prices have finally rebounded from recent lows, driven by restocking in India. Since we opened the idea on June 3, Evraz has outperformed the RTS and Russian flat steel producers, posting a total return of 18%. We are also downgrading our long-term recommendation on the stock to HOLD. > Global steel markets have recently been experiencing a gradual recovery, largely fueled by robust demand in China. Chinese steel demand rose 10% y-o-y in July on the back of massive infrastructure-led stimulus. Chinese HRC prices have jumped more than 20% since the beginning of April, while exports have dropped to record lows. The Chinese economy appears to be undergoing a steady recovery and is already nearing pre-virus levels. Chinese Premier Li Keqiang recently provided a positive outlook for the remainder of the year, estimating that GDP growth would be positive this year. Although we expect Chinese steel demand to stay strong, we see limited upside for Russian export steel prices for now, as steel-making margins in China are already at their highest level since the start of 2019.> Coking coal prices have bounced to $136/tonne on the back of restocking in China and India. Prices are already close to the marginal cost of production. Barring a supply disruption (like rail bottlenecks in Australia last year), we see limited upside from here.> Since we opened our trade idea on June 3, Evraz has outperformed the RTS and Russian flat steel producers, posting a total return of 18%. We close our trade idea to buy the stock and downgrade our long-term recommendation to HOLD.