Table of Contents
Investment thesis .....................................................................3
Key macro charts and performance tables ................................................................5
Updated commodity and earnings forecasts .............................................................6
Coal – sector to find support...................................................8
The re-rating potential.............................................................................................8
Coal prices fall to price cap level .............................................................................8
Markets rebalancing ................................................................................................9
Arbitrage window for imports close… .....................................................................9
… potentially easing import pressure.....................................................................10
China Coal Supply and Demand model..................................................................11
Steel – overcapacity remains ................................................12
Valuations rebounding from lows toward historical levels......................................12
Valuations approaching replacement costs .............................................................12
Low utilisation rates imply weak profits ................................................................12
China steel output cuts have been aggressive .........................................................13
Small mills driving the bulk of output shuts ...........................................................13
Small mills now back in the black... potential restarts?...........................................14
Inventory levels in line with seasonal period ..........................................................15
Sentiment remains fragile......................................................................................15
China Steel Supply and Demand model .................................................................16
Aluminium – waiting on output cuts.....................................17
Profits squeeze over past few months.....................................................................17
Markets look through the trough............................................................................17
Inventories rising ..................................................................................................17
Supply remains stubbornly high.............................................................................18
China's high cost aluminium position.....................................................................18
Aluminium semis net exports declining .................................................................19
China now less reliant on alumina imports.............................................................19
Companies ..............................................................................21
Shenhua Energy ....................................................................................................22
China Coal Energy ................................................................................................26
Yanzhou Coal .......................................................................................................30
Chalco ..................................................................................................................34
China Hongqiao Group..........................................................................................38
Angang Steel.........................................................................................................42
Baoshan Iron & Steel – A......................................................................................46
Maanshan Iron & Steel..........................................................................................50
Shougang Concord International............................................................................54