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Companhia Siderúrgica Nacional Message Board

  • mmports2010 mmports2010 Sep 14, 2010 11:23 AM Flag

    From Barclays

    Trade Focus: Brazilian ore to gain share in
    China / Steel imports near highs
    In this report we analyze the detailed breakdown of Brazilian trade figures for the month
    of August, which was recently reported by the Brazilian Foreign Trade Ministry.
    Higher iron ore exports channeled to China (Figures 3 and 4): The higher level of
    Brazilian iron ore exports during August (second-highest level ever at 29.8Mt, +17%
    m/m) was entirely attributable to higher demand from China. Ore exports to China
    reached 15.1Mt in August, +50% m/m. Shipments to Europe and Japan were relatively
    unchanged m/m at 5.5Mt (-7% m/m) and 3.6Mt (+8% m/m), respectively. We expect
    a slowdown in Chinese crude steel production (and consequently, iron ore demand)
    over the upcoming months. However, we believe Brazilian miners are well positioned
    and set to gain market share in China (potentially from India and/or domestic sources).
    Shipments out of Brazil take, on average, 40-45 days to arrive in China, and should
    remain at strong levels in September.
    No signs of flat steel imports easing; Imports up 8% m/m (Figure 7): Flat steel
    imports amounted to 350kt in August, up 8% m/m. The current figures represent the
    second-highest figure ever, and should lead to a tough pricing environment for the
    Brazilian flat steel makers. The flat steel value chain remains overstocked, with the
    inventory to shipments ratio (I/S) of 4.0x at the distributors’ level (vs. normalized levels
    of 2.6x). We believe the domestic market is experiencing a structural shift, which should
    result in lower pricing power going forward.
    Long steel imports at a new record high (Figure 8): Long steel imports reached a new
    high at 100kt in August, 60% higher m/m. As a reference, this figure compares to
    average monthly imports of 25-26kt during 2009/2008. It is important to highlight that
    these figures exclude long products which are not produced in the country, mainly
    railway components and some specific tubes. We acknowledge that long steel
    producers are relatively less threatened by imported material in the short-term, mainly
    due to: (i) lower coordination of traders; (ii) a more fragmented market; (iii)
    specification issues; and (iv) distribution channels. Nevertheless, we believe that the
    long steel pricing premium is also set to compress over the mid/long run.
    We maintain our relative preference for iron ore miners over steelmakers on a 12-
    month time frame. Buy Vale, Bradespar (11% discount to NAV) and MMX. Amongst
    Brazilian steels, CSN is our preferred play on its rising iron ore exposure and earnings
    outlook.

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