Today - Wednesday, March 12, 2014
- The release of 5M barrels is a test, says the government, to check for proper operations and infrastructure. Offers to buy are due by 2 ET on Friday.
- Oil was nicely lower today already and dipped further on the news, but has since returned to where it was before the release hit the wires, -1.4% to $98.66 per barrel.
- The latest EIA report released just minutes ago shows crude inventories up by 6.2M barrels last week.
- USO -1.2%
- ETFs: USO, OIL, UCO, SCO, DTO, DBO, CRUD, USL, UWTI, DNO, DWTI, SZO, OLO, OLEM, TWTI
- A moderate global equity selloff is today's excuse, but something about buying the rumor, selling the news comes to mind as gold gains another 1.4% this morning to $1,365 per ounce, its highest level since last fall. Gold's big move began late last year as the Fed initiated the taper, and continues in 2014 as the central bank presses forward with the wind-down, and trots out a few on the FOMC to float the chance of rate hikes as soon as early 2015.
- GLD +1.4%, SLV +1.5% premarket
- ETFs: GLD, SLV, AGQ, IAU, PHYS, SIVR, USLV, ZSL, SGOL, UGL, DGP, GLL, DZZ, UGLD, DSLV, DGL, DBS, GLDI, DGZ, AGOL, DGLD, SLVO, TBAR, USV, UBG, GLDE, GYEN, GEUR, GGBP
Tuesday, March 11, 2014
- Noranda Aluminum (NOR) -4.2% AH after announcing a secondary public offering of 10M common shares by Apollo Global Management; NOR will receive no proceeds from the offering.
- NOR also discloses that extraordinary weather production disruptions may result in a $0.03-$0.04 increase in integrated cash cost per pound during Q1 vs. prior expectations; the New Madrid and Gramercy facilities have resumed normal operations after severe winter weather hurt production in January and February.
- Rentech (RTK -7.1%) and Rentech Nitrogen Partners (RNF -2.4%) tumble after posting wider than expected net losses and disappointing revenue.
- RTK reported a Q4 loss of $0.06/share, $0.04 worse than the consensus analyst estimate, while revenues fell 14.3% Y/Y to $79.3M vs. $84.7M consensus.
- RNF reported a Q4 loss of $0.45/share vs. consensus estimate of an $0.08 loss, while revenues fell 40.9% Y/Y to $54.6Mvs $69.7M consensus.
- Management believes completed capacity expansion projects have increased production rates and should increase production for the year at the Pasadena and East Dubuque facilities.
- Alcoa (AA +1.7%) has enjoyed a 15% run YTD, and Morgan Stanley’s Paretosh Misra thinks shares look expensive at 34x 2014 earnings forecasts vs. the historical one-year forward P/E of 14x, but the firm sees three reasons Alcoa shares could hold up nicely.
- Stanley thinks Q1 consensus looks too low; based on quarter-to-date average FX, alumina and aluminum prices, the firm sees Q1 EPS at ~$0.10 vs. current consensus of $0.04.
- The auto body sheet story has gained traction, the firm says, sensing investors may overlook weakness in near-term earnings given the focus on 2015-20.
- Alumina prices are $15/ton below the YTD peak level, but the firm cites some expectation that Indonesia may not restart bauxite export this year, which could tighten the market.
- Still, Morgan’s base case for AA stock is $11, 11% lower than today’s price.
- Fears of a China slowdown have sent iron ore prices tumbling, and BHP Billiton (BHP) and Rio Tinto (RIO) are warning of lower prices through this year, but J.P. Morgan analysts maintain a Buy rating on Brazilian iron ore producer Vale (VALE -1.5%).
- The firm thinks iron ore prices and could test Sept. 2012 lows of ~$87/ton, but prices below $110-$120 should be temporary as weaker prices should make high cost producers uneconomical and, together with a potential resumption in restocking at lower levels, should act as a buoyant force on prices.
- Also, JPM says Vale shares already have priced in a very pessimistic scenario, and valuations are attractive even with iron ore prices at $100/ton.
- Osisko Mining (OSKFF +0.3%) urges patience from its shareholders and says it is still pursuing a range of alternative to Goldcorp's (GG +0.4%) hostile C$2.89B takeover offer, a day after Goldcorp said it is extending its offer to acquire all of Osisko’s shares to March 21.
- Osisko countered with a statement reminding its shareholders that a settlement agreement between the two companies stipulates that Goldcorp cannot take up and pay for any Osisko shares deposited to its bid before April 15.
- Osisko shares have been trading well above the implied value of Goldcorp’s offer since the bid was announced Jan. 14.
- FMC Corp.'s (FMC -2.3%) decision to split its agriculture and pharmaceutical businesses from stodgier commodity minerals to create a more valuable company will make it harder for Dow Chemical (DOW -0.6%) CEO Andrew Liveris to resist activist pressure to do the same, DealBook's Kevin Allison writes.
- The story views some parallels between the two companies, despite the size difference: Both have specialty chemical businesses and trade below their best-performing peers.
- A crucial plank in DOW’s defense is that the company benefits from an integrated supply chain, with commodity petrochemicals often serving as building blocks for higher-margin specialty products; still, it’s tougher to argue against a breakup when a rival with similar growth businesses is doing the same, Allison believes.
- A continued wave of morning selling has brought copper lower by 4.3% on the session to $2.95 per pound, the weakest level since the summer of 2010.
- Copper started the year at $3.40 and its swift decline this week comes amid horrid Chinese export numbers, a plunging price of iron ore, and chatter about defaults and banks calling in loans in China.
- JJC -3.1%
- Other copper ETFs: CPER, CUPM
- Copper producer ETFs: COPX, CU
- The SPDR Gold Trust (GLD +0.6%) saw 7.5 tons of new gold on Monday and the gold ETF sector as a whole had 8.5 tons, the largest single-day inflows since October 2012, says Commerzbank.
- "On balance, gold ETFs have now recorded only marginal net outflows since the start of the year, meaning that this bearish factor has disappeared."
- Gold continues to hold gains in morning trade, +0.6% and near its high for the year at $1,349 per ounce.
- ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, GLDI, DGZ, AGOL, DGLD, TBAR, UBG, GLDE, GYEN, GEUR, GGBP
- Freeport McMoRan (FCX) has cut ore production by ~60% at its Grasberg copper and gold mine in Indonesia, according to a union official, two months after exports were halted over a dispute with the government on a new tax.
- FCX and fellow U.S. miner Newmont Mining (NEM) have been locked in talks with the government for weeks over the controversial export tax on mineral concentrates, which rises from 25% this year to as high as 60% by H2 2016.
- "We want to move out of our West African position," BHP Billiton (BHP) iron ore division president Jimmy Wilson tells an iron ore conference in Perth, emphasizing the miner's desire to sell its west African iron ore assets.
- Wilson adds that he remains confident in the outlook for iron ore demand despite the current price slump, underpinned by the expected growth in China's steel output in the next decade.
- Meanwhile, Rio Tinto (RIO) chief of iron ore Andrew Harding says his company’s current iron ore production ramp up to 290M metric tons/year is expected to be achieved ahead of schedule.
Monday, March 10, 2014
- DuPont (DD) -1% AH after saying in an 8-K filing that Q1 sales and earnings will be “challenged” by the unusually cold North American winter and disruptions in Ukraine.
- However, DD maintains its FY 2014 forecast for operating EPS of $4.20-$4.45, citing an improvement in global industrial production and lower agriculture input costs; consensus analyst estimate is $4.43.
- Shares of Cliffs Natural Resources (CLF -4.2%) can't withstand today's news of plunging spot iron ore prices prompted by weak Chinese export data; adding insult to injury, Axiom Capital initiates coverage of CLF with a Sell rating, saying the iron ore and coal miner is "living on a prayer."
- The firm thinks CLF likely will blow through its debt covenants in 2014, further cut its dividend, and likely need to do a very large dilutive equity deal - with "acute liquidity risk" if the company is not able to execute these options; $114 iron ore suggests bankruptcy is a growing reality.
- It didn’t have to be this way, the analysts lament; CLF once had a steady business selling iron to non-coastal companies, but it wanted to get in on the China play, so it purchased other mines - now it’s paying for it.
- Barrick Gold (ABX -1%) says it will place ~41M shares of its African Barrick Gold (ABGLF) subsidiary with institutional investors, representing ~10% of African Barrick shares and ~13.5% of the parent's holdings in the company.
- ABX says the offering will be made through an accelerated book-build offering process to be launched immediately; the offering has yet to be priced.
- ABX, which like many large miners bought pricey assets at the top of the commodity cycle, has been shedding non-core assets and cutting costs.
- ArcelorMittal (MT -2.2%) CEO Lakshmi Mittal says the political crisis in Ukraine has caused domestic steel demand to drop because people weren't investing, though costs have fallen because the local currency has weakened against the dollar.
- Steel sales to customers in Ukraine from MT's Kryvyi Riy steel plant will but cut in half as a result of the crisis, Mittal says, adding that the material is being diverted to different markets.
- The Kryvyi Riy plant, one of Ukraine's largest, produced 6.4M metric tons of crude steel in 2013.
- World corn stocks of 158.47MMT is higher than last month's estimate of 157.3 and trade expectations of 156.27. Domestic ending stocks, however, are now placed at 1.456B bushels vs. 1.481 last month and trade expectations of 1.488.
- Domestic bean ending stocks of 145M bushels is down from 150 last month, but ahead of trade expectations for 141. World stocks of 70.64MMT vs. 73.01 previously and forecasts for 71.46.
- Domestic wheat ending stocks of 558M bushels compares to 558M last month and 570M forecast.
- Markets are reading the news as bearish, with corn off a nickel, beans down $0.25, and wheat off $0.02
- CORN -0.25%, SOYB -0.75%, WEAT -1.2%
- Related ETFs: JJG, GRU, WEET
- Archer Daniels Midland (ADM +1.9%) is upgraded to Outperform from Market Perform with a $50 price target at BMO, which believes ADM is in the early stages of a strategic "transformation" that should create earnings upside in H2 2014 and into 2015.
- The firm sees "uncanny" potential parallels between ADM and Tyson Foods: ADM has just exited a trough earnings period with EPS of $2.50-plus despite unprecedented challenges; has relatively new management that appears in a position to offer financial growth targets; should benefit from improving fundamentals; should begin to realize benefits from recent capex projects and cost savings efforts; and should deploy cash toward shareholder friendly options.
- Amcol International (ACO -2.1%) finally agrees to be acquired by Minerals Technologies (MTX +4.1%) for ~$1.7B after Imerys (IMYSF) failed to match MTX's sweetened bid of $45.75/share.
- MTX is the last man standing in the bidding warfor ACO, which lured six increased offers in just three weeks and has been the most active U.S. takeover target valued at $1B-plus so far this year.
- US Steel (X) is upgraded to Buy from Neutral with a $32 price target, up from $27, at Nomura on free cash flow potential.
- Nomura says it sees many reasons to own X after the stock's 18% correction since January; after meeting with the CEO and CFO last week, the firm has increased conviction in the company’s direction as well as the opportunity sets in the commercial, financial and operating functions of the business, and sees cash flow significantly increasing in the coming years.
- Shares -0.5% premarket.