瑞信-亚太地区-金属与采矿业-大宗商业预测：看好钢铁原材料而非能源煤炭-2091.5.14-46页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.14 May 2019Asia Pacific/AustraliaEquity ResearchDiversified Metals&Mining Bulk Commodity Forecasts SECTOR FORECASTThe Credit Suisse Connections Series leverages our exceptional breadth of macro and micro research to deliver incisive cross-sector and cross-border thematic insights for our clients.Research AnalystsMatthew Hope61 2 8205 4669matthew.hopecredit-Yang Luo852 2101 6328yang.luocredit-Sam Webb61 2 8205 4535sam.webbcredit-Samuel Catalano44 20 7883 0346samuel.catalanocredit-Caio Ribeiro55 11 3701 6324caio.b.ribeirocredit-Neelkanth Mishra91 22 6777 3716neelkanth.mishracredit-Curt Woodworth,CFA212 325 5117curt.woodworthcredit-Ari Jahja62 21 2553 7976ariyanto.jahjacredit-Michael Slifirski61 3 9280 1845michael.slifirskicredit-Conor Rowley44 20 7883 9156conor.rowleycredit-Paworamon(Poom)Suvarnatemee,CFA66 2 614 6210paworamon.suvarnatemeecredit-Hoonsik Min82 2 3707 3761hoonsik.mincredit-Chien Po Huang886 2 2715 6342chien-po.huangcredit-Prateek Singh91 22 6777 3894prateek.singhcredit-Bullish on steel raw materials,not energy coalWeve lifted our iron ore price forecasts 21%and expect a price peak of$110/t in 3Q19 when we believe Chinas trade stocks at ports may be exhausted.Our revised supply&demand estimate indicates a 57Mt iron ore deficit in 2019,which we expect will largely impact China.When supply is no longer available from ports,steel mills are likely to bid aggressively for spot iron ore cargoes rather than willingly curtail blast furnaces.Revisions to our supply&demand forecast include higher Chinese steel output(+32Mt)and greater supply losses from the big iron ore miners.Figure 1:Revised iron ore,met coal&thermal coal price forecasts2Q-193Q-194Q-192019E2020E2021E2022E LT(real)Iron ore finesNewUS$/dmt9511095968575657562%Fe OldUS$/dmt9079657964605875China CFRChg%6%39%46%21%33%24%12%0%58%Fe high Al NewUS$/dmt819582807060526065%Fe NewUS$/dmt11012911211298867586Metallurgical coalNewUS$/t203200205203205200180160HCC(prime)OldUS$/t170150150160130120120140FOB AustChg%19%33%37%27%58%67%50%14%Semi soft coal NewUS$/t138130133133133130117105ULV-PCI coal NewUS$/t150150154149154150135120Thermal CoalNewUS$/t85858587808075756000kcOldUS$/t9595959585808075FOB NewcastleChg%-11%-11%-11%-8%-6%0%-6%0%High ash 5500kcNewUS$/t6062626160605562Source:Credit Suisse estimatesWe have lifted our met coal price forecasts as we now expect the Prime HCC price will remain at its current$200/t level for an extended period,supported by the domestic China price.We gained confidence in the durability of the Chinese coking coal price from our visit to Shanxi in March,due to quality shortages,the Shanxi cost base,and financial needs of the Big SOEs that lead HCC pricing.We also increased our LT HCC price to$160/t from$140/t,modelled as an incentive price.We have cut our Newcastle coal price forecasts as the price is being undermined by discounted coal displaced from Europe.European coal prices have collapsed as a mild winter left ports overstocked,and an LNG glut has driven gas prices down to levels where coal-to-gas switching looks viable.Credit Suisse oil&gas analysts expect the glut to persist to 2021,so cheap gas may accelerate the closure of coal-fired power in Europe.Atlantic coal suppliers will look to Asia for new markets;but China is buying 5500kc high-ash coal again,so that price should stabilise above$60/t.14 May 2019Bulk Commodity Forecasts2China Steel Output China steel output is critical for iron ore and met coal forecastsChinas steel output is critical for iron ore and met coal forecasts.China produces half the worlds steel,and imports 70%of the worlds seaborne iron ore to feed the mills.It has much greater self-sufficiency for met coal importing only 18%of the worlds export supply but its domestic coking coal price appears to support the seaborne price.In this section,we set out our global steel production forecasts,and discuss the China steel assumptions that underpin our bulk commodity forecasts.Weve revised up our China steel production forecast on stronger-than-expected reported demand.In 1Q19,Chinas apparent consumption of steel amounted to 216Mt,up 8.9%YoY,stronger than our previous estimate of-2%YoY for the 2019 year.Figure 2:Global steel forecasts used for Iron Ore and Metallurgical Coal modelsMt2013201420152016201720182019f2020f2021f2022fChina822822804808832928940920910900EU 28166169166162168168168169170172NAFTA119121110110115120123126127128India81878995101106113121129138Japan111111105105105104106108109111S Korea66727069717274747577Taiwan22232122222323232424Russia69717171717273747475Ukraine33272324212123242425Turkey35343233383738384042Brazil34343331343536363840RoW9299979893102103105105105Global Total1650167016201628167317881819181818251837YoY5.8%1.2%-3.0%0.5%2.8%6.8%1.8%-0.1%0.4%0.6%World ex-China828848816820841860879898915937YoY-0.1%2.4%-3.7%0.4%2.6%2.2%2.3%2.1%2.0%2.3%EU 28-1.8%2.1%-1.8%-2.5%4.0%-0.5%0.2%0.6%0.6%1.2%NAFTA-2.1%1.7%-9.5%0.4%4.6%4.3%2.5%2.4%0.8%0.8%China12.4%0.0%-2.2%0.6%2.9%11.5%1.3%-2.1%-1.1%-1.1%India5.2%7.4%2.0%7.3%6.2%4.5%6.6%7.1%6.6%7.0%Japan3.1%0.1%-5.0%-0.3%-0.1%-0.6%1.7%1.7%1.6%1.6%S Korea-4.4%8.3%-2.6%-1.6%3.6%1.4%2.1%0.8%1.1%2.1%Taiwan8.1%3.9%-7.8%1.7%3.2%2.5%0.0%0.0%4.3%0.0%Russia-1.5%1.9%0.3%-0.1%1.0%0.7%1.4%1.4%0.0%1.4%Ukraine-0.5%-17.1%-15.6%5.4%-11.9%-1.6%9.5%4.3%0.0%4.2%Turkey-3.4%-1.9%-7.3%5.2%13.1%-1.4%2.7%0.0%5.3%5.0%Brazil-1.0%-0.8%-1.9%-6.0%9.9%1.9%2.9%0.0%5.6%5.3%RoW1.5%7.5%-2.4%1.0%-4.4%9.3%1.0%1.9%0.0%0.0%Source:Company data,Credit Suisse estimatesWe raise our China steel production estimateAggressive 1Q China steel output overruns our previous assumptionsChinas steel output has started the year aggressively,up 9.6%YoY in 1Q19,according to WSA figures.We had a negative outlook for steel output for the year,down 2.2%,but that is now looking unachievable after 1Q.We have revised our forecast to+1.3%,to 940Mt of crude steel for the year(Figure 3).On a more granular basis,we continue to forecast steel production to roll over mid-year and decline at a modest-2.9%YoY in 2H(Figure 4).Based on first quarter steel output,we would now need steel output to fall 7.7%YoY in 2H 14 May 2019Bulk Commodity Forecasts3to meet our previous forecast of 908Mt.We dont consider such a sharp downturn is realistic.Figure 3:China crude steel production and apparent demand forecasts2013201420152016201720182019f2020f2021f2022fChina production(Mt)822822804808832928940920910900Production YoY12.4%0.0%-2.2%0.6%2.9%11.5%1.3%-2.1%-1.1%-1.1%China net(imports)/exports(Mt)48.379.4106101655655504948China domestic use(Mt)773.7742.9698707767872885870861852Domestic use YoY12.3%-4.0%-6.1%1.4%8.4%13.7%1.5%-1.7%-1.0%-1.0%Source:WSA,Credit Suisse estimatesSupply side responding to rebounding demand and positive marginsWhile we have concerns over the veracity of reported steel output,the positive trend for reported steel production is confirmed by strong steel PMI production index readings,and CISAs 10-day production numbers.We believe the increase has been driven by rebounding fixed asset investment(1Q-19:+6.3%YTD)and real estate investment(+11.8%YTD in 1Q19),which are both looking stronger than we expected for 2019E,lending support to steel demand.Figure 4:Our revised forecast for China steel outputFigure 5:China steel apparent consumption by year606570758085Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19Jul-19Sep-19Nov-19Monthly steel output(Mt)New steel estimatePrevious steel estimate1.71.81.92.02.12.22.32.42.52.62.7Jan Feb Mar Apr May JunJul Aug Sep Oct Nov DecSteel apparent consumption(Mt per day)2013201420152016201720182019Source:Credit Suisse estimates,WSASource:CEIC,Credit Suisse estimatesSupply side responding to rebounding demand and positive marginsWe first espoused a negative view on 2019 China steel demand(and thus steel production rates)late in 2018,underpinned by expected weakness in the property sector.Thus far in 2019,this view has proven incorrect as we have been surprised by the strength in reported steel production in China YTD.While we believe that some statistical inaccuracies are over-blowing the YoY growth rates in Chinese steel production,it is fair that property starts and construction activity has been in excess of our previous expectation.While our timing looks to be inaccurate,we can see signs that the property slowdown we had expected earlier this year will begin to play out,leading to weakening steel demand in 2H19 and into 2020.Signs that steel demand may weakenSpecifically,we have seen:A steep decline in the Shanty Town Redevelopment Program by 43%YoY in 2019,which is likely to see new home sales in lower tier cities turn negative.14 May 2019Bulk Commodity Forecasts4The target for fiscal stimulus growth announced at the recent two-sessions meetings of 6.5%was the lowest seen in over a decade.CISA and Baosteel have recently raised the alarm on the scale of steel production this year.Baosteel said demand is likely to slow in 2019.But also upside risksThat said,we recognise sizeable risks to our thesis of softening steel demand this year.One risk is that the steep increase for properties under construction this year continues to support steel production,despite a downturn in new builds from the Shanty Town program.It can take three years to complete residential towers in China,so current construction could further defer the negative effects of slowing new starts.The 24%and 51%lift in sales of excavators and cranes in 1Q could be taken as reinforcement for this risk,if the sales reflect the intentions of property developers.Another key risk remains the trade dispute between China and the US.If the dispute worsens and tariffs rise,we consider China may focus on incentivising domestic demand for autos and appliances to offset export losses.China might also further relax funding restrictions and add stimulus to the economy,which may lift steel demand for property and infrastructure.The effect of such a stimulus on steel demand in China could outweigh the softening of exports.We consider these aspects in greater detail below.Overall,a cautious China steel view moving into 2020We believe China steel is close to a near-term steel-demand peak,but the difficulty is predicting the timing of the roll-over,particularly as changes in Government policy in response to economic data can have such a sharp effect on activity.Considering the downside and upside points,we still expect gradual softening in underlying steel demand in China through the second half of the year and into 2020.However,given the risks we outline,we have to say that the level of our conviction in the timing of the roll-over is not strong.What has driven steel demand so far this year?We had expected China steel demand to fall on a negative view of property The basis for our previous negative call on China steel output was an expected downturn in Chinese property.As housing sales turned negative late last year,we expected new starts to follow the lead of sales.It still may happen,but in the first quarter,reported steel demand was robust.So what is happening on the ground?View from the ground in China is positive for steel,but not+9%Our China Basic Materials Analyst,Yang Luo,spent most of March in China and found that industry was less bearish than he had expected.Based on his observations,and in comparison with concrete and cement demand,he believes real demand for steel was probably in the vicinity of+2%.Thats a long way short of apparent steel demand from reported statistics of+8.9%in 1Q(Figure 5).Yang considers there may be a couple of reasons for the discrepancy.First,there was no serious winter curtailment in 1Q this year,whereas last year there was,so base effects might explain some of the percentage rise.Second,there are undoubtedly some statistical inaccuracies.Over the last couple of years,Chinas measurement of steel production has greatly improved as the stringent environmental restrictions have led to close inspection and monitoring of all steel mills.The data is now more complete and accurate than past years,but still not perfect.If the reported 1Q production in 2018 was short by 14Mt and the oversight was corrected this year,the true YoY growth rate would be 2%,rather than the 14 May 2019Bulk Commodity Forecasts5reported 8.9%.With China producing half the worlds steel output,14Mt of steel equates to about 1.5%,well below the threshold for statistical significance.But we have to use reported data despite questionable accuracyBe that is it may,we still need to use the data as reported,and the steel production in 1Q exceeded 2.5Mt per day,a vast rate of production no matter what the size of the increase.There is no evidence of high steel inventory.Reported inventory has been easing since the beginning of March(Figure 6,Figure 7),and is relatively depleted.Steel inventory at traders has reduced to 12.5Mt as of early May,down 7.4%vs same period last year.Inventory at mills fell to 12.8Mt in mid-April,down 12%YoY.The inventory decline is largely in-line with typical seasonality,and provides support to short-term steel prices.The evidence suggests the steel was consumed at a rate of over 2.4Mt per day(Figure 5).But what sectors did it feed?Figure 6:Steel traders rebar stocks in China(kt)Figure 7:CISA mills&traders steel stocks(days)20030040050060070080090010001100JanFebMarAprMayJunJulAugSepOctNovDeckt20132014201520162017201820196810121416182010-Jan31-Jan21-Feb14-Mar04-Apr25-Apr16-May06-Jun27-Jun18-Jul08-Aug29-Aug19-Sep10-Oct31-Oct21-Nov12-DecSteel inventory(days consumption)2013201420152016201720182019Source:Steelhome,Credit Suisse estimatesSource:Mysteel,Steelhome,CISA,Credit Suisse estimatesThe steel seems to have been consumed in property and machinery againOnce again it seems that property is driving steel demand in China,as it has since 2016.The surge in new starts that occurred last year seems to have fed through to property under construction,given that the area being built in March was almost double that of a year ago(Figure 9).The properties under construction are probably still in the steel-intensive phase.14 May 2019Bulk Commodity Forecasts6Figure 8:China steel use by sectorFigure 9:Property under construction,sales,startsAutomotive9%Construction-low grade5%Construction-Infrastructure24%Construction-non-resi property18%Construction-residential property14%Household appliances2%Machinery22%Other4%Shipbuilding2%050100150200250300-50%-40%-30%-20%-10%0%10%20%30%40%50%Jan 12Apr 12Jul 12Oct 12Jan 13Apr 13Jul 13Oct 13Jan 14Apr 14Jul 14Oct 14