isri sept 2013 presentation
Post on 11-Jul-2015
152 Views
Preview:
TRANSCRIPT
Key International Ferrous Scrap Markets
ISRI Chicago Commodities Roundtable Forum 2013
17th September 2013 Jarek Mlodziejewski
Senior Analyst
This document does not constitute an offer or solicitation to buy or sell any investment product(s). It does not take into account the specific investment objectives, financial situation or particular needs of any person. Investors should seek advice from a financial adviser before investing in any investment products or adopting any investment strategies. In the event that the investor chooses not to seek advice from a financial adviser, he/she should consider whether the product in question is suitable for him/her. The investment product(s) discussed herein are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not necessarily a guide to future performance.
Unless expressly stated, we do not make any representations nor give any warranties in respect of the information contained in this presentation. To the extent permitted by the applicable law, we hereby exclude all warranties, conditions, representations or duties whatsoever and howsoever arising (whether express or implied) including but not limited to any representations or warranties as to the ownership of intellectual property or other rights in the presentation, or the satisfactory quality, merchantability or fitness for a particular purpose of, any goods or services referred to at any time in this presentation, any express or statutory warranties, and any warranties or duties regarding accuracy, timeliness, completeness, performance, availability, lack of negligence or of workmanlike effort.
To the fullest extent allowed by applicable law, you agree that we will not be liable to you or your business under any circumstances whatsoever (whether in contract, negligence or any other tort, breach of statutory duty or otherwise) for any loss of profits, income, business interruption, loss of business information or for increase in any costs, liabilities or expenses or any other loss whatsoever and however arising directly or indirectly out of or in connection with or relating to the information in this presentation and we shall not be liable for any loss, damages, costs, expenses or other liability which you incur or suffer as a result of your use of the information in this presentation.
We take all such steps as are reasonably necessary to provide information that is accurate and reliable, but exclude to the fullest extent permitted by law any liability for the inaccuracy of the information in this report.
The Steel Index (TSI) used all reasonable endeavours to certify the correctness of the information contained in this presentation.
Without limiting the above, you acknowledge and agree that we shall not be liable for matters beyond our reasonable control including but not limited to information gathered during field visits, third party information presented or the acts of third parties.
You understand and expressly agree that use of the information presented here is at your sole risk, that any content, material and/or data presented or verbalised or otherwise obtained through your use of the information in this presentation is at your own discretion and risk and that you will be solely responsible for any damage to you personally or your company or organization or business associates whatsoever which in any way results from the use, reliance or application of such content material and/or data and/or information.
All INFORMATION PRESENTED IN THIS REPORT IS AGREED TO BE CONFIDENTIAL AND CANNOT BE REPRODUCED WITHOUT THE EXPRESSED PERMISSION OF THE STEEL INDEX
Disclaimer
Agenda
• Introduction to TSI and our Methodology
• Scrap Update – Key International markets o Turkey o India oAsia
• Scrap – - ‘New’ Opportunities in an old game
Coverage
Steel Hot rolled coil* Cold rolled coil HDG coil Plate Rebar Stainless
Regions covered
USA* Asia Northern Europe* Southern Europe* Turkey India (coming soon)
Iron Ore 62% Fe Fines* 58% Fe Fines* 63/63.5% Fe Fines* 62% Fe (2% Al) Fines*
Scrap HMS 1&2 (80:20)* Shredded A3 P&S
Regions covered
Chinese imports*
Regions covered
Turkish imports* USA Indian imports Taiwanese imports
• Daily Indices Basis for cleared derivatives contracts
Coking Coal Premium Hard
Coking Coal Hard Coking Coal
Regions covered
Australia
TSI methodology
Specialist price information service
Impartial, mechanistic operation compiling spot prices for wide range of ferrous products
Systematic, data-driven index methodology applied consistently world-wide
Offices in Pittsburgh, Shanghai, London and Singapore
Scrap indices published for US Midwest shred, Turkish HMS 80:20, Taiwanese and Indian shredded imports
Agenda
• Introduction to TSI and our Methodology
• Scrap Update – Key International markets o Turkey o India oAsia
• Scrap – - ‘New’ Opportunities in an old game
$330
$340
$350
$360
$370
$380
$390
$400
$410
CFR Turkey HMS #1&2 80:20 US$/tonne
Oversupply, weak steel markets, purchasing activities
act to depress import prices in 2013
$300
$350
$400
$450
$500
$550
CFR Turkey HMS #1&2 80:20 US$/tonne US Midwest shredded US$/tonne
Source: TSI and Platts
CFR Turkey tracks closely with US Midwest Prices. (Potential proxy for US Shred)
Correlates very well with regional “scrap pools” such as
the USA…
R2 Correlation 85%
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
US South East scrap conversion cost Turkey scrap conversion cost
Rebar imports? Bad?
The balance of payments is firmly in the favour of the US, to the tune of $2 billion in 2012
Agenda
• Introduction to TSI and our Methodology
• Scrap Update – Key International markets o Turkey o India oAsia
• Scrap – - ‘New’ Opportunities in an old game
$300
$350
$400
$450
$500
$550
CFR India containerised shredded Sample of normalised data submissions
Using CFR India as an example of the data submission process
Agenda
• Introduction to TSI and our Methodology
• Scrap Update – Key International markets o Turkey o India oAsia
• Scrap – - ‘New’ Opportunities in an old game
$300
$320
$340
$360
$380
$400
$420
$440
CFR North Asia HMS 1 US$/tonne CFR Taiwan containerised HMS 1&2 80:20 US$/tonne
Agenda
• Introduction to TSI and our Methodology
• Scrap Update – Key International markets o Turkey o India oAsia
• Scrap – - ‘New’ Opportunities in an old game
Price Risk / Missed Opportunities. • More than a century old.
• A great, great granddad that has never been bigger or fitter.
• He’s also learnt new tricks: exporting around the entire globe on an increasing scale since 2000.
• The original ‘green’ industry. • One of the few industries
contributing positively to US balance of trade. US$28bn in 2012 (ISRI).
• The master of re-invention…and yet: slow to embrace new tools, so far.
Total Ferrous Scrap Contract Trading TSI (HMS 80:20, Turkey) & AMM (Bush, US)
0100200300400500600700800900
1000
AMM Bush USA TSI HMS Turkey
Lots
trad
ed
The TSI contract is useful for coastal scrap sellers and buyers from Houston to Maine.
The AMM contract is useful for companies involved in Bushelling in the Midwest.
Companies can lock firm prices for 14 months ahead – not sell ‘To be determined’…
Total Ferrous Contract Trading TSI (HMS 80:20, Turkey) & AMM (Bush, US)
0500
100015002000
AMM Bush USA TSI HMS Turkey Iron Ore
Lots
trad
ed
…But, neither has so far ‘taken off’ – despite ‘big months’ on each contract. In contrast, iron ore saw a steady rise, pull back, then full take off.
NB – iron ore graphs are for the corresponding ‘first months’ of the contract’s life (i.e. April ‘’09 onwards NOT Aug’12/13). Iron ore is currently trading over US$2bn per calendar month (2,500 contracts per day)!
Lots traded
-3
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
$200
$250
$300
$350
$400
Cargo Value vs Jan '13 (RHS) CFR Turkey HMS #1&2 80:20 US$/tonne
Price Risk / Missed Opportunities. Value of a deep-sea cargo has fluctuated wildly since
the beginning of the year. RHS shows changes of +US$0.5m and –US$2.5m.
US$ M
illion
For sellers, the ‘best of 2013’ was over almost immediately after January closed out. It may yet come back, but that’s for Q4.
Price Risk / Missed Opportunities. (Example for processor/exporters).
330340350360370380390400410420
CFR Turkey HMS #1&2 80:20 US$/tonne Forward Curve at Jan 4th 2013
US$
/t
A forward contract entered into in January would have allowed an exporter moving 35,000t per month offshore to realise the red line, rather than the blue line.
Jan Feb Mar Apr May Jun Jul Aug Sept Cargo Value Differential if hedged 245k 420k 70k 0k 840k 1.3m 490k 70k 245k
330340350360370380390400410420
CFR Turkey HMS #1&2 80:20 US$/tonne Forward Curve at June 4th 2013
US$
/t
A forward bought in June would have allowed a mill buying 35,000t per month to realise the red line, rather than the blue line. Scrap would have cost this much less:
Jun Jul Aug Sept Cargo Value Differential if hedged -230k -560k -805k -630k
Price Risk / Missed Opportunities. (Example for mill/buyers).
Unfounded fears:
• Speculators (if you want to hedge, you need a speculator to ‘take’ your risk).
• ‘Losing’ Money versus locking prices.
• New Tools: the orange juice, milk and wheat industries use futures religiously.
• Inaction (see what happens) is not a ‘decision’.
Not hedging is gambling. Prices TBD?
Price Risk / Missed Opportunities.
Further information:
Jarek Mlodziejewski London
j.mlodziejewski@thesteelindex.com +44 207 176 7618
top related