Iron at least in 5 years shows caution over CAP

24 septiembre, 2014
China prevé menor demanda de hierro y presionaría a la baja precios del commodity

El hierro se recupera, pero proyectos siguen estancados

Banchile Investments reiterated a cautious stance towards company stock, that falls more than 32% during the year.

The price of iron is at its lowest level since September 2009 amid persistent concerns about the low Chinese demand for this ingredient to steel making.

“The balance of supply and demand in the fourth quarter of iron ore are relatively ugly …” said Melinda Moore, an analyst at Standard Bank, in a report for customers. “As a result, we are more concerned about the falling price of the fourth quarter than of any year in the last decade, except for 2008,” she added.

As far this year the mineral, which yesterday closed at US $ 79.4 per metric ton, recorded 40.38% down. This, amid production increases have finalized the four major global producers – BHP Billiton, Fortescue Metals Group, Rio Tinto and Vale, whose profitability depends on the raw material to a great extend.

In this context, Banchile Investments yesterday issued a report on the Chilean CAP after talking with the company to get their views on the fall in iron ore prices (-13% over the last three months. Notes that while the current price of about $ 80 per ton CAP continues with positive earnings, “it is clear that at least $ 75 per ton, the company would increasingly incentivized to reduce the level of production and / or investments”.

It also notes that the steel business (7% of 2014E EBITDA) has been impacted by the economic slowdown in Chile, but the peso’s depreciation should offer some relief: about 35% of costs are in pesos, while revenues are in USD.-

Banchile Investment said that despite the recent fall in the share price of CAP, “in our view driven by disappointing 2T results and the low spot price of iron, we reiterate a cautious stance toward the action as we await the stabilization of the average selling prices of iron and the and evidence that CAP can meet its delivery growth objectives”.

The stock closed yesterday down 0.55% to $ 6,626.4, accumulating in the month, a 5.69% decline in September and 32.19% so far this year.

Source: Pulso

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