1、 Goldman Sachs JBWere Investment Research All figures in US$ unless otherwise advisedImportant disclosures and the Reg AC Certification appear at the back of this report 1 ACTION 9 March 2010 Commodities Iron Ore And Coking Coal: Price Forecast Upgrade Commodities | Australia Iron ore - a bumper yea
2、r for volumes and realised prices We expect seaborne trade in iron ore to grow by a record 100 million tonnes this year as continued growth in Chinese imports is accompanied by a recovery in non-Chinese demand - albeit from low levels in 2009. The incumbent suppliers of iron ore will struggle to mee
3、t demand growth of this magnitude, meaning that high cost marginal producers remain a key part of the supply chain. This should continue to support spot iron ore prices into China; we have raised our spot price forecast for CY 2010 by approximately 15% to $113/t (FOB netback basis) 62% Fe fines. In
4、order to reduce the gap between Chinese spot prices and fixed contract prices for Australian fines, we believe the latter should rise by 60% effective from JFY 2010/11 shipments. From 2011 onwards we believe spot and contract prices will converge on a FOB netback basis. A 60% contract price rise wou
5、ld take the Asian price of Pilbara Blend fines to $96/t FOB, above the previous peak of $90/t achieved in 2008 at a time when Asian HRC prices were over $1000/t. As pricing mechanisms evolve it is increasingly necessary to view pricing in the context of average realised price achieved ($/t basis) ra
6、ther than focussing exclusively on headline contract price changes. Following recent quarterly price settlements for coking coal, iron ore could well go the same way with a transitional period during which a combination of spot, index linked, quarterly and annual prices co-exist. We expect April-Jun
7、e quarterly shipments to be offered close to $100/t FOB. To reflect higher development costs for new mine supply we have raised our long term price assumption to $75/t CFR China (basis 62% Fe fines) which nets back to $65/t FOB Australia (assuming $10/t long term freight). Our previous long term ass
8、umption was $50/t FOB Australia. Hard coking coal - 2010 floor price established at $200/t. The seaborne market for coking coal is expected to remain structurally tight for at least the next two years, but barring major unforseen supply disruptions, we do not anticipate a repeat of 2008 when buyers
9、went into panic mode and spot prices for hard coking coal hit $400/t. Differential pricing is becoming more widespread as pricing mechanisms evolve and an increasing proportion of sales are priced on quarterly terms rather than annual benchmarks. Recent quarterly settlements at $200/t appear to have
10、 been widely accepted in Japan and should provide a floor for 2010 pricing. We maintain quarterly and annual price forecasts and have raised our 2010/11 annual forecast to $230/t (was $180/t) and our 2011/12 forecast to $180/t (was $160/t). Our revised annual forecast is 78% above the prevailing con
11、tract price. Higher US exports of high-vol metallurgical coal will provide a partial “safety valve“ for the seaborne market in 2010/11 and growth in Australian exports will result in a more closely balanced market from 2011/12 onwards. But even so, suppliers of high quality coking coal with growth p
12、otential and good access to port/rail infrastructure should fare particularly well for at least the next two years. Steel - price forecasts raised to reflect higher costs We have raised our CY2010 price forecast for HRC to $615/t (was $583/t) resulting in a slight contraction in raw material gross m
13、argins. Earnings impact Please refer to Table 1 for details of earnings and valuation changes Analyst: Malcolm Southwood +61 3 9679 1647 Analyst: Paul Gray +44 20 7552 0571 渐飞研究报告 - http:/9 March 2010 Commodities Goldman Sachs JBWere Investment Research All figures in US$ unless otherwise advised2
14、 Earnings impact We have revised our earnings estimates and target prices following the changes to our commodity price forecasts. The larger changes were in the iron ore stocks with the changes in coking coal earnings forecasts being relatively modest (vs. our previous forecast). Table 1 Earnings Ch
15、ange Table GSJBWereCompany Old New Change Old New Change Old New Change Old New Change Old New ChangeUSps USps % USps USps % USps USps % % %Diversified ResourcesBHP Billiton* 192.7 192.7 0.0% 210.3 218.0 3.7% 299.1 325.1 8.7% $34.41 $35.08 2.0% NR NR NRRio Tinto 311.9 311.9 0.0% 417.7 495.6 18.7% 48
16、8.1 579.3 18.7% $62.08 $69.62 12.1% NR NR NRIron OreFortescue Metals Group* 5.6 5.6 0.0% 6.5 9.7 49.3% 26.8 34.8 29.6% $3.32 $4.02 20.9% $6.12 $6.30 3.1%Aps Aps % Aps Aps % Aps Aps % % %Atlas Iron* -19.8 -19.8 0.0% -1.1 -5.8 -4.7 14.2 12.9 -9.2% 2.28 2.60 13.9% NR NR NRMount Gibson Iron* 6.2 6.2 0.0
17、% 7.7 9.4 22.4% 14.5 20.7 42.6% 1.63 1.96 20.1% $2.48 $2.69 8.3%Murchison Metals* -4.2 -4.2 0.0% -4.4 -3.7 0.7 0.7 3.6 2.9 2.71 2.77 2.0% $3.35 $3.46 3.3%CoalMacarthur Coal* 79.3 79.3 0.0% 41.6 47.5 14.1% 76.0 96.7 27.2% $7.11 $7.57 6.5% NR NR NRRiversdale Mining* 0.2 0.2 0.0% -1.3 -1.3 0.0% 1.1 1.1
18、 0.0% $4.75 $4.80 1.1% $8.09 $8.76 8.3%Whitehaven Coal* 19.2 19.2 0.0% 12.1 12.1 0.0% 15.2 16.7 10.0% $3.70 $3.78 2.1% $5.91 $6.04 2.1%OtherIluka Resources -20.8 -20.8 0.0% -14.6 -12.6 2.0 27.2 29.5 8.7% $5.89 $6.13 4.2% $4.25 $4.25 0.0%* June year endSource: GSJBW Research EstimatesTarget PriceA$/s
19、hareA$/shareUS$/share2009a EPS 2011e EPSA$/shareValuation2010e EPSFor valuations the long term price change to US$75/t CIF for iron ore had the largest influence. This translates to US$65/t for Australian producers if we assume long term freight rates of US$10/t (and US$50/t for Brazilian producers
20、if we assume a long term freight rate of US$25/t from China to Brazil). For the Australian companies we were previously using a long term price of US$50/t FOB plus a US$8/t freight benefit giving a US$58/tonne realized long term price. As a consequence the net change is +12% for Australian producers
21、 for our modelling. This change has a major impact on the more marginal higher cost DSO production and potential magnetite producers. We also adjusted our cost assumptions (up) for some of these potential projects given the data available on magnetite production under construction. We think the risk
22、s for costs for these projects (both capital and operating expenditure) remains firmly on the upside and we remain unconvinced that they will return an acceptable rate of return over the long term. Of the major stocks RIO had the largest uplift in earnings and valuation highlighting its leverage (no
23、te for our BHP NPV we corrected an error that was translating some terminal AUD NPV inputs at spot currency rather than long term currency assumptions which dampened the US$ NPV increase - it would have been 7% without this error correction). ILUs earnings were uplifted also due to its royalty from
24、BHP for Project Area C. For Atlas we made several major changes to our assumptions following its result and an updated presentation to investors (see separate Daily Cable article). Our target price increases were modest reflecting the target price methodology which attempts to capture spot prices an
25、d commodity price forecast movements in advance. For the stocks we are able to comment on our preference in iron ore is: MGX ($1.76) - BUY; FMG ($4.48) - HOLD; MMX ($2.66) - HOLD BHP ($43.40), RIO ($76.15) and AGO ($2.21) are all Not Rated. We believe FMG has the most leverage (financial plus operat
26、ing) if conditions remain robust and we will review our recommendation if it continues to deliver operationally and provide more clarity financially. In coal our preference is: WHC ($4.80)- BUY; CEY ($3.93) - HOLD; RIV ($8.32) - HOLD MCC ($11.87) is not rated, MCC has the most leverage to metallurgi
27、cal coal. 渐飞研究报告 - http:/9 March 2010 Commodities Goldman Sachs JBWere Investment Research All figures in US$ unless otherwise advised3 We will review CEY if it continues to deliver operationally (the last quarter was good) and achieves the appropriate price increases for its coal. For WHC, it is ap
28、proaching its target price and we would look for price related opportunities to switch to CEY in the absence of further positive data for WHC. Iron Ore and Metallurgical Coal Price Forecasts Table 2 Iron Ore Contract Price Forecast (basis FOB major port)New Prev. New New New Prev. New Prev.JFY (Apr-
29、Mar) US$/t (62% Fe) % Ch. (y/y) US cents/DMTU US cents/DMTU US cents/DMTU US cents/DMTU2006/07 73 46 19% 20 382007/08 80 50 9% 22 372008/09 145 90 80% 57 862009/10 97 60 -33% 15 172010/11 (F) 155 131 96 60% 30 26 45 402011/12 (F) 155 131 96 0% 39 34 65 582012/13 (F) 147 124 91 -5% 37 32 61 64Long Te
30、rm(4)104 80 65 30 24 55 46Notes(1)Hamersley fines, (2)Hamersley lump, (3)Vale BF-Pellets, FOB Tubarao,(4)2014 nominal terms.Source: Company data, GSJBW Research estimates.US cents/DMTULump Premium(2)Pellet Premium(3)Australian Fines (contract)(1)Table 3 Metallurgical Coal Contract Price: US$/tonne,
31、FOB AustraliaJFY (Apr - Mar) US$/t % Ch. y/y Prev. Fcast US$/t % Ch. y/y Prev. Fcast US$/t % Ch. y/y Prev. Fcast2005/06 (actual) 125 117% 85 100% 100 107% 1Q-10 1802006/07 (actual) 116 -7% 58 -32% 65 -35% 2Q-10 2002007/08 (actual) 98 -16% 64 10% 68 4% 3Q-10 2202008/09 (actual) 300 206% 240 275% 245
32、263% 4Q-10 2002009/10 (actual) 129 -57% 80 -67% 85 -65% 1Q-11 1802010/11 (fcast) 230 78% 180 125 56% 106 160 88% 140 2Q-11 1702011/12 (fcast) 180 -22% 160 100 -20% 90 130 -19% 120 3Q-11 1602012/13 (fcast) 150 -17% 133 90 -10% 90 110 -15% 100 4Q-11 160Long Term(4)111 81 87(1) premium grade, low-vol b
33、rands, 70 CSR and above.(2)“typical“ Hunter Valley brand. (3)“typical“ Bowen Basin brand, VM2mtChina: Import Dependancycoking coal and iron ore imports as % of consumption0%10%20%30%40%50%60%70%80%2005 2006 2007 2008 2009 2010 FIron OreCoking CoalSource: GSJBW Research EstimatesAustralia is well pos
34、itioned to benefit from long term volume growth. Australia accounts for over 60% of world exports of metallurgical coal and is well positioned to increase its share of global trade over the medium/long term. Figure 9 shows some of the key mine expansions for hard coking coal scheduled to be develope
35、d over the next five years. No doubt there will be slippage in terms of timing, but we believe there is now a firm 渐飞研究报告 - http:/9 March 2010 Commodities Goldman Sachs JBWere Investment Research All figures in US$ unless otherwise advised9 commitment on the part of miners and infrastructure operato
36、rs/owners to support the long term growth of Queenslands export coking coal industry. Major port infrastructure projects scheduled for the next 10 years are shown in Figure 10. The development of new ports and associated rail capacity will of course depend on the associated development of mining pro
37、jects feeding into the respective infrastructure corridors. In order to benefit from the significant export opportunities available over the next 5-10 years, a coordinated approach to investment is required on the part of all participants of the Australian coal supply chain. Fig 9 Fig 10 Queensland
38、Hard Coking Coal Mine Capacity, million tpy020406080100120140160Capacity: 2010 Planned Capacity: 2015othersPeabodyValeAnglo Q-CoalBMA ExistingSource: GSJBW Research EstimatesQld mine capacity could rise by 60mt (70%) by 2015.Queensland Coal Portspotential nameplate capacity (million tpy)050100150200
39、25030035040045020082009201020112012 2015 2020Gladstone - BalaclavaIslandGladstone - WigginsIslandGladstone - Barney PointGladstone - RG TannaDalrymple BayHay PointAbbot PointBrisbaneSource: McCloskey, Queensland Government, GSJBW Research estimates.Steel: higher costs will be largely (but not fully)
40、 passed through We have made a small upward adjustment to our steel price forecasts, entirely on the basis of cost push rather than demand pull. We now expect Asian HRC prices to average $615/t in CY2010 (previous forecast $583/t). We have assumed that steel mills are able to pass through almost the
41、 entire cost addition from higher raw material prices and maintain broadly stable raw material margins on a dollar per tonne basis (Fig 11). However, the established downward trend in steel margins on a percentage basis is unlikely to reverse over the next two years in our opinion. Fig 1 Fig 12 Stee
42、l Price and Raw Material MarginUS$/t01002003004005006007008009002005 2006 2007 2008 2009 2010F 2011FAsia HRC $/t margin over coal and iron oreSource: GSJBW Research Estimates, SBBSteel Raw Material Margin HRC % margin over iron ore and coal cost0%10%20%30%40%50%60%70%80%2005 2006 2007 2008 2009 2010
43、F 2011F100% contract 50:50 spot:contract (iron ore)Source: GSJBW Research Estimates, SBB渐飞研究报告 - http:/9 March 2010 Commodities Goldman Sachs JBWere Investment Research All figures in US$ unless otherwise advised10 Each of the analysts named below hereby certifies that, with respect to each subject
44、company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectl
45、y, related to the specific recommendations or views expressed in this report: Malcolm Southwood, Paul Gray 渐飞研究报告 - http:/Disclosures of Interest ATLAS IRON LIMITED: AGO: Goldman Sachs JBWere and/or its affiliates have managed or co-managed a public offering of securities of the company or its affil
46、iates in the past 12 months. AGO: Goldman Sachs JBWere, in conjunction with its affiliates, is advising Atlas Iron Limited in connection with engaging a development partner for the Ridley Magnetite Deposit. Goldman Sachs JBWere and/or its affiliates may receive fees for acting in this capacity. BHP
47、BILLITON LIMITED: BHP: Goldman Sachs and/or its affiliates make a market in the securities of the company. BHP: Goldman Sachs JBWere and/or its affiliates have received during the past 12 months compensation for financial and advisory services from the company, its parent, or its wholly owned or maj
48、ority owned subsidiary. BHP: The Goldman Sachs Group, Inc. is a specialist in the securities (including derivative securities) of the company. BHP: Goldman Sachs and Goldman Sachs JBWere each have research coverage of the company the subject of this report. Any views, investment opinions or recommen
49、dations relating to the subject company published by Goldman Sachs JBWere are independently developed and may differ from those published by Goldman Sachs. BHP: Goldman Sachs International and its affiliate, Goldman Sachs JBWere, are acting as financial advisor to BHP Billiton in relation to its announced agreement to establish a West Australian iron ore production joint venture with Rio Tinto. Goldman Sachs International and its af
