Regional Industry Focus

Regional Steel
Refer to important disclosures at the end of this report

DBS Group Research . Equity 14 June 2017

Steel margins should be intact, CRY Index : 175.83
Analyst
contrary to market expectations Lee Eun Young +65 6682 3708
 Intact steel mill’s spread thanks to relatively eunyoung@dbs.com
stable steel prices: 2Q17 earnings to be Addison Dai +852 2971 1931
stronger than market expectation addisondai@dbs.com
 Introduction of new benchmark pricing of
STOCKS
coking coal to benefit steel mills.
 Time to regain investor interest, buy POSCO &
Angang Steel Price
Mkt Cap
12-mth
Performance (%)
(13 Jun) Target Price
Rebound in steel mills’ margins, one-year high for China’s KRW/HKD US$m KRW/HKD 3 mth 12 mth Rating
May PMI. The steel spread has improved m-o-m for both the
POSCO 278,500 21,546 330,000 (0.7) 35.0 BUY
world (+US$40/ton) and China (+US$44.9/ton) markets, as HRC
Seah Besteel
prices have remained flattish amid plunging raw materials’ prices. Corporation
28,850 918 36,000 4.8 8.7 BUY
Supported by strong order inflows in May, China’s Steel PMI has
Hyundai Steel 60,200 7,128 67,000 (2.1) 28.7 BUY
reached a one-year high of 54.8 despite the fall in crude steel
Angang Steel 5.23 5,470 7.25 (12.4) 67.0 BUY
production. We expect the steel mills will maintain healthy margins
backed by improved supply-demand balance going forward. Maanshan Iron &
2.87 3,563 2.10 (8.5) 82.5 HOLD
Steel
Brightening earnings amid stable raw material prices. The
improved spread with sound industry activities imply resilient Source: Bloomberg Finance LP, DBS Bank
earnings in 2Q17, we believe the key players will deliver stronger
results than market consensus. Iron ore and coking coal prices are
Steel Spread
likely to remain weak as iron ore inventory at Chinese ports has
reached a historical high, while China’s domestic coke prices are (US$/ton) Spread(World Benchmark HRC - Iron Ore Fines 62%
expected to be weighed down by increasing production as the 550 Fe spot)
Spread(World benchmark HRC prices - iron ore prices &
inspection of China’s coal mines has been completed in end-May. 500 coking coal prices)
Meanwhile, steel prices would continue to be stable backed by 450
capacity elimination in China. Iron ore and coking coal have both 400
plunged by c.40% to US$54.4/ton and US$154/ton from their 350
respective peaks recorded in Mar and Apr. 300
New pricing system for coking coal pegged to average price 250
index. Nippon Steel & Sumitomo Metal Corp announced on 12 200
Jun its adoption of the quarterly average spot index prices from 150
2Q17 onwards, and other players should follow suit. In the past, 100
the quarterly contract price of coking coal market used to be fixed 50
by negotiation between Australian miners and Japanese steel mills. 0
We view the shift to the new pricing system positive for steel mills, 14.7 14.12 15.5 15.10 16.3 16.8 17.1
as steel companies will obtain fair prices not affected by volatile
spot price at the time of the contract. In fact, the average spot Source: Bloomberg Finance L.P., DBS Bank
index prices have historically been lower than quarterly contract
prices, especially in the recent quarters where the price was
exceptionally volatile.
Underperforming share prices strengthen valuation
attractiveness. Sector has been underperforming the market
since Apr due to weak steel prices. As a result, the valuation
discount to the market has widened. Also, the sector will gain
investor interest as China successfully eliminates IFF steel capacity
(c.10% of China’s total steel-making capacity) by 30 Jun. Our top
picks are POSCO and Angang Steel , which are expected to
register the strongest earnings growth among peers in 2017.

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ed: CK / sa: AS, PY
Regional Industry Focus
Regional Steel

Steel spread is intact, thanks to relatively stable China’s May steel PMI reaches the highest level in a year. On
steel prices the other hand, China’s steel PMI climbed 5.7 points m-o-m
to 54.8 in May, the highest level in a year. The growth of
Steel spread has improved since end-Apr. Following the fall in 10ppts in its major sub index, the new orders index, was the
iron ore and steel prices in mid-Mar, steel prices (calculated by main driver. At the same time, the finished product inventory
subtracting iron ore & coking coal prices from the world index shrunk sharply, explaining the robust steel PMI for May
benchmark HRC price) had been on a downtrend until the end despite the m-o-m decrease in crude steel output. The
of Apr. Despite the persistence of weak raw material prices production decline would be a positive result from the
(20.8% and 31.9% drop in iron ore and coking coal prices, restructuring in China, as the most IFF had closed in 2Q17.
respectively, since 1 May), the world HRC price was unchanged We expect that steel mills will maintain healthy margins
at S$496/ton – as a result, the steel spread has improved by backed by improved supply-demand balance going forward.
US$40/ton. The spread in China has also improved although it
had suffered a lot more fluctuations compared to the spread for China : Elimination of IFF (“Ditiao Steel”) capacity
the world benchmark HRC price. The Chinese market saw Province Eliminated capacity of
domestic HRC price increasing 4.5% m-o-m to US$396/ton on 9 "Ditiao Steel" (tons)
Jun, driving a substantial improvement in steel spread by Yunnan 6.00
US$44.9/ton m-o-m to US$220.5/ton on 9 Jun. The spread had
Liaoning 10.07
earlier plummeted to US$126/ton on 26 Apr.
Gansu 1.93
IFF shutdown on its path to success. In response to central Guizhou 1.40
government’s pledge towards supply-side reform, China has Hubei 1.80
curtailed its steel capacity of Intermediate Frequency Furnaces Jiangsu 12.33
(IFF). Of note, China has eliminated c.38.5 tons of IFF capacity Anhui 2.47
in terms of effective steel output contribution, according to
Inner Mongolia 2.58
CISA (China Iron & Steel Association). As per our channel
checks, the readings represent 90% of the end-Jun capacity T ota l 38. 57
elimination target, while remaining 10% of the capacity cut Note: "Ditiao Steel" are those low-quality steel produced in
intermediate frequency furance (IFF)
target is still under operation due to their strong relationship Source: Media, local NDRC (National Development and Reform
with local government. In general, the development of the IFF Commission)
capacity shut-down is in line with market’s expectations.

World steel spread vs. China steel spread China’s Steel PMI
(US$/tonne) World Steel Spread China Steel Spread (pts)
400 60.0 2014 2015
350 55.0 2016 2017
300
50.0
250

200 45.0
150 40.0
100
35.0
50

0 30.0
14.9 14.12 15.3 15.6 15.9 15.12 16.3 16.6 16.9 16.12 17.3 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Steel Spread = Benchmark HRC price – coking coal & iron ore prices
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

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 Regional Industry Focus
Regional Steel

Brightening 2Q17 sector earnings
2Q17 earnings to exceed market expectation. We expect the
earnings of regional steel mills to exceed initial expectations in
light of the recent margin improvement, although the negative
headwinds arising from steel price weakness since Mar and
high-priced input materials purchased in 1Q17 should be
unavoidable. We expect sector earnings to improve significantly
y-o-y, backed by margins improvement and sales volume
growth.
Earnings in 2H17 to be sustainable. Recently, Baosteel and some
other Chinese mills have reduced their shipment prices for July
to factor in the spot prices’ fall since Apr in China. Meanwhile,
the spot steel prices are currently stabilising and likely to
rebound. Of note, the shipment price cuts by Baosteel have
historically happened at the end of spot prices’ fall. We believe
that 2H17 earnings should be resilient despite weak steel prices,
thanks to the cost reduction from lower raw material prices.
Expect more interest from investors; our top picks
are POSCO & Angang Steel
Underperforming share prices and attractive valuation. Coupled
with weak steel and raw material prices, the share prices of steel
mills have been underperforming the market since Apr. We
expect the sector to gain investor interest as China successfully
eliminates their target capacity cut of 50m tons through the IFF
facilities shutdown, by the deadline of 30 Jun.
The sector has been trading at a discount to the market average
and the gap has been widened recently given that i) sector share
prices have underperformed despite earnings’ upward revision,
ii) the valuation multiples have been stretched following strong
stock markets. Hence, we think the attractiveness in terms of
valuation has been strengthened, which will support steel mills’
share prices at current levels, at least.
Expect the stronger earnings than expected. Our top picks are
POSCO and Angang Steel as they are the leading players in the
sector. Besides, they are also expected to register the strongest
earnings growth among peers in 2017.

Spread between China HRC prices and spot iron ore prices Steel mills’ margins vs. HRC prices and input cost
(US$/ton) Spread (L) (US$/ton) (US$/ton) Spread (US$/ton)
Bench mark HRC prices
HRC benchmark prices (L) 800 450
Input cost of iron ore and coking coal per ton of steel
700 China import Iron Ore Fines 62% Fe spot(R) 250
700 400
600 200 350
600
500 300
150 500
400 250
400
100 200
300 300
50 150
200 200 100
100 0 100 50
0 -50 0 0
10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17

Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

Valuation indexes
HK Metal HK Metal HK Metal HK HK KOREA- KOREA- KOREA- KOREA - KOREA-
& Mining & Mining & Mining P/E(x) P/BV(x) Metal & Metal & Metal & P/E(x) P/BV
P/E(x) P/BV(x) ROE(%) Mining Mining Mining
P/E(x) P/BV(x) ROE(%)
2014 11.2 1.3 -6.0 12.0 1.4 10.6 0.7 4.3 15.9 1.1
2015 10.6 1.6 16.3 12.0 1.3 17.3 0.6 3.0 13.0 1.0
2016 7.9 1.0 10.6 13.0 1.2 22.3 0.5 2.9 10.8 1.0
2017F 8.2 1.2 15.1 18.0 1.5 11.2 0.6 5.4 12.8 1.2
Source: IBES Datastream., DBS Bank

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Regional Industry Focus
Regional Steel

Sector Indexes
MSCI World Local MSCI World Metal & MSCI EM Local MSCI EM Metal & KOSPI Index KOSPI Basic Metallic
Mining Mining Index
12 June 1,473 216 54,128 565 2,358 4,871
1wk % (0.1) 0.6 (0.5) 0.4 (0.0) 1.5
1month % 0.6 2.3 0.4 (0.4) 3.6 4.0
3month % 2.3 (1.7) 6.0 (6.3) 11.8 1.6
YTD % 7.6 2.6 12.7 1.1 16.8 4.2
1 year % 18.3 22.8 20.3 25.5 19.6 17.3
Source: Bloomberg Finance L.P., DBS Bank
MSCI World Index vs. MSCI World Metal & Mining MSCI EM Index vs. MSCI EM Metal & Mining
('07=100) ('07=100)
MSCI World Metal & Mining 200 MSCI EM Local
140 MSCI World Local MSCI EM Metal & Mining
180
120 160
140
100
120
80 100
80
60
60
40 40
07.1 08.1 09.1 10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1 07.1 08.1 09.1 10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank
KOSPI Index vs. KOSPI Basic Metallic Index World HRC price vs. POSCO share price
('07.1=100) (k KRW) POSCO share price (L) (US$/tonne)
250 KOSPI 600 800
KOSPI Basic Metallic Index Iron & Steel SteelBenchmarker Hot rolled
230
coil World Export Market $ per tonne
210 700
500
190
600
170 400
150 500
130 300
110 400
90 200
300
70
50 100 200
07.1 08.1 09.1 10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1 10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

Iron ore price (62% Fe) vs. Angang Steel share price World HRC price vs. Angang Steel share price
(HK$) Angang Steel share price (L) (US$/tonne) (HK$) Angang Steel share price (L) (US$/tonne)
20 200 20 800
Iron Ore delivered to Qingdao China
18 - 62% Ferrous Content 180 18 Iron & Steel SteelBenchmarker Hot rolled
coil World Export Market $ per tonne 700
16 160 16
14 140 14
600
12 120 12
10 100 10 500
8 80 8
400
6 60 6
4 40 4
300
2 20 2
0 0 0 200
10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1 10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1

Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

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 Regional Industry Focus
Regional Steel

Earnings forecasts and valuation

PO SCO (KR W b n ) FY2 0 1 3 FY2 0 1 4 FY2 0 1 5 FY2 0 1 6 FY2 0 1 7 F FY2 0 1 8 F
Total Revenue 61,865 65,098 58,192 53,084 56,227 58,295
Operating Profit 2,996 3,214 2,410 2,844 3,511 3,717
EBITDA 5,682 6,452 5,628 6,058 6,697 6,936
EBIT 2,996 3,214 2,410 2,844 3,511 3,717
Profit Before Tax (After-EI) 1,946 1,378 181 1,433 2,265 2,491
Net Profit (After-EI) 1,376 626 181 1,363 1,823 2,004
EV/ EBITDA (X) 7.7 7.3 7.1 6.6 5.9 5.5
Return on Average Equity (ROAE) % 6.5% 1.5% 0.4% 3.3% 4.3% 4.6%
EPS (After-EI) 15,787 7,181 2,072 15,637 20,906 22,986
EPS (After EI) Growth (%) (YoY) 0% -55% -71% 655% 34% 10%
P/E (X) 17.6 38.7 134.2 17.8 13.3 12.1
Price/ BVPS (X) 0.5 0.5 0.5 0.5 0.5 0.5

Hyu n d a i Ste e l Co . (KR W b n ) FY2 0 1 3 FY2 0 1 4 FY2 0 1 5 FY2 0 1 6 FY2 0 1 7 F FY2 0 1 8 F

Total Revenue 13,533 16,762 16,133 16,692 18,029 18,569
Operating Profit 763 1,491 1,464 1,445 1,486 1,532
EBITDA 1,700 2,672 2,569 2,773 2,780 2,792
EBIT 986 1,483 1,295 1,408 1,428 1,453
Profit Before Tax (After-EI) 782 1,099 927 1,130 1,202 1,266
Net Profit (After-EI) 692 765 734 818 870 916
EV/ EBITDA (X) 9.5 6.3 6.9 6.3 5.8 5.1
Return on Average Equity (ROAE) % 6% 6% 5% 5% 5% 5%
EPS (After-EI) 8,102 6,562 5,866 6,131 6,519 6,867
EPS (After EI) Growth (%) (YoY) -13% -19% -11% 5% 6% 5%
P/E (X) 7.4 9.2 10.3 9.8 9.2 8.8
Price/ BVPS (X) 0.5 0.5 0.5 0.5 0.5 0.5

Se a h B e s te e l Co rp (KR W b n ) FY2 0 1 3 FY2 0 1 4 FY2 0 1 5 FY2 0 1 6 FY2 0 1 7 F FY2 0 1 8 F

Total Revenue 2,113 2,202 2,527 2,531 2,783 2,891
Operating Profit 144 175 222 143 175 188
EBITDA 238 272 379 313 352 362
EBIT 149 181 245 162 194 207
Profit Before Tax (After-EI) 129 163 215 133 169 192
Net Profit (After-EI) 104 124 151 89 128 145
EV/ EBITDA (X) 6.3 4.5 5.8 6.2 5.1 4.5
Return on Average Equity (ROAE) % 7.5% 8.5% 10.2% 5.5% 7.1% 7.6%
EPS (After-EI) 2,900 3,444 4,208 2,473 3,565 4,048
EPS (After EI) Growth (%) (YoY) -12.7% 18.8% 22.2% -41.2% 44.1% 13.6%
P/E (X) 9.8 8.3 6.8 11.5 8.0 7.1
Price/ BVPS (X) 0.7 0.7 0.7 0.6 0.6 0.5

An g a n g (R M B m) FY2 0 1 3 FY2 0 1 4 FY2 0 1 5 FY2 0 1 6 FY2 0 1 7 F FY2 0 1 8 F

Total Revenue 75,329 74,046 52,759 59,207 70,831 73,756
Operating Profit 3,193 4,275 -1,053 3,954 3,486 4,594
EBITDA 6,197 6,835 1,508 7,281 7,395 8,589
EBIT 1,946 2,851 -2,417 3,208 3,417 4,529
Profit Before Tax (After-EI) 728 1,579 -3,763 1,996 2,327 3,579
Net Profit (After-EI) 770 928 -4,593 1,610 1,762 2,709
EV/ EBITDA (X) 7.6 7.4 30.5 5.9 5.7 4.5
Return on Average Equity (ROAE) % 1.6% 2.0% -10.1% 3.7% 3.9% 5.8%
EPS (After-EI) 0.11 0.13 -0.63 0.22 0.24 0.37
EPS (After EI) Growth (%) (YoY) -119.1% 20.5% -594.9% -135.0% 9.4% 53.8%
P/E (X) 41.5 34.4 -7.0 19.8 18.1 11.8
Price/ BVPS (X) 0.7 0.7 0.7 0.7 0.7 0.7

M a a n s h a n (R M B m) FY2 0 1 3 FY2 0 1 4 FY2 0 1 5 FY2 0 1 6 FY2 0 1 7 F FY2 0 1 8 F

Total Revenue 29,404 36,086 44,110 55,622 67,835 73,488
Operating Profit 7,643 8,591 7,984 12,330 15,771 17,085
EBITDA 10,802 12,238 12,196 18,689 23,001 24,943
EBIT 8,739 9,126 7,476 12,847 16,388 17,779
Profit Before Tax (After-EI) 7,379 7,328 5,259 9,457 12,788 14,604
Net Profit (After-EI) 5,593 5,314 3,649 6,540 8,833 10,083
EV/ EBITDA (X) 5.6 5.1 6.7 5.1 4.1 3.6
Return on Average Equity (ROAE) % 22.8% 18.1% 10.8% 17.0% 19.6% 19.2%
EPS (After-EI) 0.95 0.89 0.58 0.91 1.23 1.41
EPS (After EI) Growth (%) (YoY) 2.6% -6.4% -34.7% 57.0% 35.1% 14.1%
P/E (X) 6.5 6.9 10.6 6.7 5.0 4.4
Price/ BVPS (X) 1.4 1.1 1.1 1.1 0.9 0.8
Source: DBS Bank

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Regional Industry Focus
Regional Steel

Sector valuation

P/BV: HSI vs KOSPI Metal & Mining Index ROE: HSI vs KOSPI Metal & Mining sector
(x) (%)
4.0 30
3.4 HK Korea
3.5 HK Korea 24.4
25
3.0
20
2.5 16.6 16.3
15.1 15.1
2.0 14.5 14.2
15
1.5 1.6 12.1 12.6 11.9
1.4 1.3 1.5 10.8 10.6
1.5 1.2 1.0 1.3 1.2 1.3 1.2 9.5
1.0 1.1 1.0 10 8.6
1.0 7.1
1.0 0.8 0.8 6.3 6.4
0.7 0.6 0.6 5.4
0.5 4.0 4.4
0.5 5 3.0 2.9

0.0 0
07 08 09 10 11 12 13 14 15 16F 17F 07 08 09 10 11 12 13 14 15 16F 17F
Source: IBES, DBS Bank Source: IBES, DBS Bank

Trailing P/BV: HSI Metal & Mining index Trailing P/BV: KOSPI Basic Metal Index
HONG KONG-DS Ind. Met & Mines - PRICE/BOOK KOREA-DS Ind. Met & Mines - PRICE/BOOK RATIO
5.0 2.5
RATIO
4.5
4.0 2.0

3.5
3.0 1.5
+2sd +2sd
2.5
+1sd
2.0 +1sd
1.0 Avg
1.5 Avg
1.0 -1sd
-1sd 0.5
-2sd
0.5
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0.0
2007 2009 2011 2013 2015 2017

Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

Trailing PE: HSI Metal & Mining index Trailing PE: KOSPI Basic Metal Index
KOREA-DS Ind. Met & Mines - (PE)
25.0
HONG KONG -DS Ind. Met & Mines - (PE)
40.0

20.0
35.0

30.0
15.0 +2sd
25.0

10.0 +1sd
20.0
Avg

15.0 Avg
5.0

10.0
-1sd
0.0
5.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

0.0
-5.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Bloomberg Finance L.P., DBS Bank

Source: Bloomberg Finance L.P., DBS Bank

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 Regional Industry Focus
Regional Steel

Peer comparison

Market
PER PBR EV/EBITDA ROE
Share Cap
12 June price (US$m) FY17F FY18F FY19F FY17F FY18F FY19F FY17F FY18F FY19F FY16F FY17F FY18F
Korea listed players
Posco 278,000 21,422 9.1 8.6 8.0 0.5 0.5 0.5 5.5 5.4 5.2 6.0 6.1 6.2
Korea Zinc 447,500 7,463 12.7 11.7 10.9 1.4 1.3 1.2 6.0 5.6 5.3 11.2 11.2 11.0
Hyundai Steel 60,300 7,112 8.0 8.0 7.7 0.5 0.4 0.4 6.4 6.2 6.0 6.0 5.8 5.7
Seah Besteel 28,550 905 9.7 8.8 8.6 0.6 0.5 0.5 6.3 5.9 5.8 6.0 6.3 6.2
Poongsan 40,700 1,008 6.6 6.6 6.3 0.8 0.7 0.7 6.2 6.2 6.1 13.2 11.9 11.2
HK-listed players
Aluminum Corp of
China 3.6 8,613 17.8 12.7 8.9 1.1 1.0 0.9 9.5 8.6 8.1 7.1 8.2 9.6
United Co. Rusal 3.8 7,402 6.2 5.5 5.4 1.7 1.3 1.0 8.4 8.1 8.5 29.8 24.6 24.4
Jiangxi Copper 11.9 6,784 17.9 16.1 11.8 0.8 0.7 0.7 9.9 8.8 6.4 4.4 4.8 6.4
Zinjin Mining 2.5 10,123 12.5 10.9 9.6 1.5 1.4 1.3 9.8 8.7 8.2 12.7 12.8 13.5
Angang Steel 5.1 5,356 13.0 10.9 10.1 0.7 0.7 0.6 7.6 7.1 7.2 5.2 5.9 6.0
Maanshan Steel 2.8 3,462 9.8 9.0 8.1 0.9 0.8 0.7 6.9 6.7 6.5 8.6 8.8 9.1
China A-share listed players
Baosteel-A 6.5 21,006 11.0 9.4 9.1 1.0 0.9 1.0 7.0 6.3 6.4 9.6 9.0 8.5
Hebei Iron & Steel-A 4.3 6,702 23.0 19.1 16.1 1.0 0.9 0.9 11.9 11.3 N/A 4.6 4.9 5.5
Angang-A 5.1 5,356 15.2 12.9 10.9 0.8 0.8 0.7 7.4 6.8 6.5 5.1 5.8 6.6
Maanshan Steel-A 3.2 3,462 13.7 12.2 10.2 1.2 1.1 1.0 6.9 6.7 6.1 8.8 9.1 9.7
Asian listed steel players:
China Steel Corp. 24 12,593 19.9 17.4 17.4 1.2 1.2 1.2 10.2 9.5 9.7 6.1 7.1 6.8
Tata Steel 507 7,657 10.8 9.2 8.1 1.4 1.3 1.0 6.9 6.5 6.1 13.1 13.7 13.6
Steel authority of
India 57 3,660 47.8 10.1 N/A 0.6 0.6 N/A 11.5 8.0 N/A 0.2 4.2 N/A
JSW Steel 202 7,452 11.6 9.7 8.8 1.8 1.6 N/A 6.3 5.8 5.7 16.3 16.8 16.3
Jindal Steel & Power 123 1,732 N/A 14.5 9.5 0.5 0.5 N/A 7.8 6.3 5.3 (2.0) 3.6 3.9
JFE 1,883 10,545 10.7 9.3 9.0 0.6 0.5 0.5 7.1 6.6 6.5 5.2 5.6 5.5
Nippon Steel 2,441 21,148 11.0 9.6 9.4 0.7 0.7 0.7 8.1 7.4 7.2 6.8 7.4 7.1
Nisshin Steel 1,262 1,264 10.9 9.5 11.9 0.6 0.6 0.6 7.7 7.2 7.6 6.1 6.4 5.0
Kobe Steel 1,079 3,584 12.7 9.8 8.8 0.6 0.5 0.5 6.0 5.4 5.1 4.6 5.5 5.6
International listed steel players:
AK Steel 6.2 2,053 10.6 8.6 6.3 N/A 16.5 4.5 6.4 5.5 5.1 83.6 160.2 58.8
Steel Dynamics Inc 36.0 8,687 12.0 12.0 10.2 2.5 2.1 1.8 6.4 6.3 5.5 23.7 20.0 20.1
ArcelorMittal 21.2 21,521 7.8 8.1 7.5 0.7 0.6 0.6 4.5 4.5 4.5 8.0 7.3 7.6
United States Steel
Corp. 21.8 3,822 31.1 11.3 7.6 1.6 1.3 1.1 6.0 4.7 4.1 6.4 13.1 18.8
Thyssenkrupp 24.2 15,172 27.2 14.1 12.0 6.4 4.6 3.6 7.3 6.5 6.2 17.7 36.5 32.8
Nucor 59.8 19,111 13.7 13.1 11.7 2.2 1.9 1.7 7.1 6.8 6.3 17.5 16.4 17.0
Severstal 734 N/A 7.5 9.1 9.7 3.0 2.7 2.4 5.2 5.9 6.0 42.4 29.8 28.3
Steel pipe players
Seah Steel 92,200 488.9 6.5 5.7 5.2 0.6 0.5 0.5 5.2 4.6 4.1 9.0 9.4 9.5
Nippon Steel 2,441 21,148 11.0 9.6 9.4 0.7 0.7 0.7 8.1 7.4 7.2 6.8 7.4 7.1
Welspun Corp 97 411 43.4 15.8 N/A N/A N/A N/A 6.7 5.7 N/A 2.1 5.8 N/A
Tenaris SA 31 18,216 58.4 28.4 20.0 1.6 1.6 1.5 17.2 11.3 8.9 2.4 4.7 6.7

Source: Bloomberg Finance L.P., DBS Bank

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Regional Industry Focus
Regional Steel
Coking Coal: Introducing a new benchmark pricing
pegged to average spot prices
Coking coal price is back to the pre-cyclone level. Coking coal
price (Premium Hard Coking Coal, CFR China) was at
US$154/ton as of 9 Jun, down 42% from the recent peak
recorded on 13 Apr, as Australia’s shipment that was affected
by Cyclone Debbie in Apr normalises. The seaborne coking coal
market has ceded ground, with lower-price offers emerging on
thin demand. Steel mills have been restocking to prepare for the
monsoon season, and it is unlikely for the Chinese government
to introduce production-restricting measures at the moment
given that the current coking coal price is still about twice the
level prior to the imposition of China’s 276-day rule in Apr
2016.
Stable prices ahead. However, spot trading activities are gaining
momentum, driven by opportunistic Chinese end-users who
were taking advantage of competitively priced imports when
compared with domestic materials. We expect seaborne coking
coal prices to have limited downside but there would not be
strong upside potential as well, given that i) steel mills have
healthy coking coal inventories, ii) China’s domestic coke prices
would remain weak due to production increase as the
government’s inspection of environmental facilities has
completed, and iii) coal miners in China are likely to continue to
produce as long as coking coal prices stay above
RMB1,000/ton(US$146/ton), according to industry experts.
Quarterly contract to follow average spot index prices. The
coking coal market has been characterised by quarterly fixed-
pricing contracts negotiated between Australian miners and
Japanese steel mills, factoring in spot prices, the market outlook
ASIAN INSIGHTS
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and the long-term relationship between the parties. This price
would then be adopted as the benchmark by other market
participants. However, Nippon Steel & Sumitomo metal Corp
has reportedly decided on 12 Jun, together with the Australian
miners, to switch to using the price tagged to spot index
average from 2Q17 onwards. The spot indexes are provided by
pricing information services such as S&P Global Platts and Argus
Media. For example, S&P Global Platts is a leading provider of
such index prices and publishes five daily coking coal price
indexes based on its survey of transactional data.
Steel mills will likely enjoy lower prices under the new pricing
system. We have compared the historical benchmark price to
the average Platts SBB Premium Hard Coking Coal index of the
previous quarter. It seems that the contract price consistently
exceeds that of the average index price for all nine quarters,
albeit to differing degrees. Thus, we think that the steel mills
could benefit from the lower prices when spot indexes are used
for new price contracts.
To reduce impact from volatile spot price on contract price.
Notably, the gap between the fixed benchmark price and spot
average price widened tremendously in 4Q16, when prices were
unusually volatile. The 4Q16 benchmark price of US$200/ton
was 50%, or US$67/ton, higher than the average spot price
prices of 3Q16. Again in Apr 2017, coking coal price had
unexpectedly surged due to Cyclone Debbie which prolonged
the quarterly price contract negotiation for 2Q17 and eventually
led to the switch to the new pricing system. The new pricing
system is advantageous to steel mills as it ensures that they
obtain fair pricing amid a volatile price environment. Also, using
the average spot index prices eliminates the need for quarterly
negotiations on the prices.
VICKERS SECURITIES
 Regional Industry Focus
Regional Steel

Quarterly contract Hard Coking Coal price vs. average Hard Coking Coal index price of the previous quarter
(US$/tonne) SBB Premium Hard Coking Coal (FOB Australia) average price of the previous quarter
300 285
Hard Coking Coal (FOB Australia) quarterly contract price 267
250
200
200
167
150 133
113117 108110
90 93 84 89 91 92
100 77 81 79 84

50

0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Source: Bloomberg Finance L.P., DBS Bank

Quarterly contract Hard Coking Coal price vs. Hard Coking Coal index price
(US$/ton) SBB Premium Hard Coking Coal Australia Export (FOB East Coast port)
350
Hard Coking Coal (FOB Australia) quarterly contract price
300

250

200

150

100

50

0
15.1 15.4 15.7 15.10 16.1 16.4 16.7 16.10 17.1 17.4
Source: Bloomberg Finance L.P., DBS Bank

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Regional Industry Focus
Regional Steel

Gloomy outlook for coal over the long term
Korea closes eight old coal-fired plants for Jun. In an effort to
tackle the burgeoning air quality problem, Korea has ordered
eight outdated coal-fired plants to shut down for the month of
June. The Korean government has also announced its plan to
permanently close 10 old coal-fired plants (30 years or older),
within the next five years. There are total of 59 coal-fired coal
plants in Korea. President Moon Jae-In has made several other
pledges to shift away from coal, while increasing the use of
renewable energy.
Korea’s lower consumption to affect coal demand and price.
Korea has produced 1.7m tons of coal in 2016, which are only
c.1.4% of its total coal consumption. Hence, most of its coal
demand is met through imported supplies. As the third biggest
importer of Australian coal, Korea’s reduced coal usage is
expected to impact coal prices in the mid to long term. In 2016,
Korea imported a total of 118m tons of coal, of which c.40%
came from Australia.
Thermal coal vs. coking coal. Coking coal is a type of carbon
which turns into lumps called coke when being heated at high
temperature, and is mainly used in steel-making. Thermal coal,
on the other hand, burns quickly at high heat and is thus used
for power generation. However, thermal coal can also be used
in steel-making when washed to reduce ash content, and sold
as semi-soft coking coal (lower grade compared to hard coking
coal). As this process results in lower yield, it is only practiced
when the price gap between the two products are big enough
to compensate for the yield loss. Due to such interchangeability,
the prices of thermal coal and coking coal largely move in similar
direction.

Moon Jae-In’s election pledges on energy policy Thermal coal vs. coking coal price
Idle outdated coal-fired plants during April and May when fine (US$/tonne) SBB Premium Hard Coking Coal (US$/tonne)
340 Australia Export (FOB East Coast 120
dust levels tend to peak, and permanently close 10 old coal-fired
port) USD/tonne
plants earlier than scheduled; and reassessing plans to construct Australia Newcastle Port 110
290
nine new plants. Thermal Coal 6000 kcal/kg FOB
100
Spot Price (L)
elevate the issue of ultra-fine dust as his top agenda during 240
90
Korea-China talks in a bid to reduce dust levels by more than 50
percent. 190 80
Increase distribution of environmentally-friendly cars at the 70
expense of old polluting diesel vehicles. 140
60
Scrap plans to build new nuclear plants, including No. 5 and No.
90
6 Shin-Kori reactors. Close the Wolsong No. 1 nuclear plant with 50
immediate effect. 40 40
Increase the use of renewable energy to 20% by 2030. 15.1 15.4 15.7 15.10 16.1 16.4 16.7 16.10 17.1 17.4

Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES

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 Regional Industry Focus
Regional Steel

Iron ore prices are likely to remain weak
Iron ore price has reached its trough. 62% Fe iron ore (CFR
China) was trading at US$54.4/ton on 9 Jun, down by over 40%
from the recent peak recorded in mid-Mar. We expect iron ore
price to remain weak as stocks at Chinese ports have been
building up (+24.5% YTD) to historical-high levels and more
supply from Australia and Brazil miners is expected to emerge.
However, we think that iron ore price has limited downside risk
from the current level. Despite the sharp drop of iron ore and
coking coal prices, steel prices have not fallen significantly,
hence supporting steel mills’ margins. Thanks to sound margins,
steel mills have not reduced their production significantly
despite the recent retreat of steel prices, which will result in
sound demand for seaborne iron ore.
Iron ore’s price has plunged since mid-Mar. Contrary to market
participants’ expectations, iron ore price had continued to rally
throughout 1Q17 despite burgeoning stock at ports. The decline
in iron ore price was sparked by plummeting coking coal price
since mid-Mar. The strong coking coal price has pushed up the
price of high Fe content iron ore, as using higher Fe content iron
ore would require less coking coal to make melted steel. The
inventory of low-Fe content iron ore has been building up
during this period, as the steel mills’ strong appetite towards
high grade iron ore has increased and the price gap between Fe
62% and Fe 58% has widened to US$28/ton from the historical
average of US$7/ton since 2010. While the price gap has
narrowed to US$12/ton, this is still higher than the historical
average.

Iron ore exports by company Spot iron ore price & spot coking coal prices
Iron Ore delivered to Qingdao China - 62% (US$/ton)
Ferrous Content (L) 30 Spread between 62% vs 58% iron ore
(U$/ton)
import Qingdao port
China Iron Ores Fines 58% Iron Import from
200
India Qingdao Port Price
180 20
160
140
120 10
100
80
0
60
12.1 13.1 14.1 15.1 16.1 17.1
40
20 -10
09.11 10.11 11.11 12.11 13.11 14.11 15.11 16.11
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

China : Iron ore import China : Iron ore inventory at major ports & import prices
(m ton) Iron ore inventory (RMB/ton)
(m ton) China's import of iron ore & concentrates
100 140 1,800
China Iron Ore 64% Fe Import Price 1,600
90 120 Qingdao Port
1,400
80 100
1,200
70 80 1,000
60 60 800
50 600
40
400
40
20 200
30
0 0
10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1
10.7 11.7 12.7 13.7 14.7 15.7 16.7
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

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Regional Industry Focus
Regional Steel

Key data – Steel

Last Change (%)
updated Latest 1-week 1-month 3-month YTD
World Price
22/05/2017
(US$/ton) Hot Rolled 496 0.0 (5.9) (3.9) (3.7)
Hot Rolled 09/06/2017 3,276 1.2 3.6 (11.0) (12.3)
China Price
Cold Rolled 09/06/2017 3,774 0.3 2.5 (18.2) (20.5)
(CNY/ton)
Rebar 09/06/2017 3,848 (2.9) 2.9 (1.6) 15.2
Korea Price
09/06/2017
(KRW/ton) Hot Rolled 650,000 (4.4) (9.7) (15.6) (12.2)
U.S. Steel Scrap No 1 HMS 22/05/2017 271 1.9 1.9 7.5 12.0
Korea Steel Scrap Busheling A
Raw Material Price 09/06/2017
(KRW/ton) 255,000 0.0 (5.2) (8.9) (7.6)
(US$/ton)
62% Fe Iron Ore (CFR Qingdao) 09/06/2017 54.4 (5.9) (10.4) (37.3) (31.0)
Hard Coking Coal (FOB Australia) 09/06/2017 140 (0.9) (24.7) (6.2) (23.8)
Hot Rolled 09/06/2017 2,576 (1.6) (6.4) (14.2) 32.6
Cold Rolled 09/06/2017 1,315 (0.8) (7.1) (3.1) 41.9
China Inventory
Rebar 09/06/2017 3,734 (3.3) (24.6) (52.4) (16.4)
(k tons)
Plate 09/06/2017 887 (1.2) (10.6) (13.5) 20.7
Iron Ore 09/06/2017 140,050 2.6 6.1 7.7 22.9
Utilisation Rate (%) U.S. Steel Capacity Utilisation 05/06/2017 75 (0.3) (0.1) 0.4 8.7

Last Change (%)

Monthly updated Latest 1-month 3-month 1-year YTD
China's Blast Furnaces Utilisation 28/02/2017 89.3 (0.5) 4.2 (0.1) (9.5)
Utilisation rate (%)
WSA Steel Capacity Utilisation 30/04/2017 73.6 2.4 6.2 3.5 8.9
World 30/04/2017 142,080 (1.0) 2.9 5.0 5.8
China 30/04/2017 72,777 1.1 7.7 4.9 8.3
Crude Steel South Korea 30/04/2017 5,481 (5.6) (7.9) (2.9) (6.5)
Production United States 30/04/2017 6,717 (2.6) (3.7) 1.8 3.7
(k tons)
European Union 30/04/2017 14,296 (4.8) 1.2 6.1 11.2
Other Europe 30/04/2017 3,316 (2.6) 6.3 8.1 6.6
India 30/04/2017 8,065 (3.2) (6.8) 4.8 (4.0)
China Steel Exports 31/05/2017 6,980 7.6 21.4 (25.9) (10.5)
China Steel Imports 31/05/2017 1,110 2.8 1.8 1.8 (6.7)
China Iron Ore Imports 05/06/2017 13,522 (21.3) (1.6) (13.2) (31.2)
Import/Export (k tons)
China Coking Coal Imports 05/06/2017 8,463 31.7 35.8 57.7 44.4
Korea Steel Exports 31/03/2017 3,035 (0.0) (0.0) 0.1 (0.0)
Korea Steel Imports 31/03/2017 2,146 (0.2) 0.0 (0.0) 0.0
Finished Steel Output 30/04/2017 94,898.0 (1.9) 14.0 (1.8) (0.9)
China (k tons)
Steel Apparent Consumption 11/06/2017 67,867.9 0.0 19.4 8.4 11.1
Steel PMI (Pt) 31/05/2017 54.8 11.6 6.6 7.7 15.1

Source: Bloomberg Finance L.P., Steel Daily, DBS Bank

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 Regional Industry Focus
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Key data – Non-ferrous metal

Last Change (%)
updated Latest 1-week 1-month 3-month YTD
Aluminium 09/06/2017 1,902 (0.8) 1.5 3.0 11.0
Copper 09/06/2017 5,739 3.2 4.4 1.5 4.3
LME Spot Price Zinc 09/06/2017 2,480 (1.1) (5.8) (6.6) (3.2)
(US$/ton) Lead 09/06/2017 2,097 1.2 (3.9) (5.8) 5.6
Nickel 09/06/2017 8,805 1.0 (4.2) (12.8) (12.0)
Tin 09/06/2017 18,930 (7.3) (4.2) (1.9) (10.7)
Gold 09/06/2017 1,275 (1.0) 3.1 5.9 9.3
Comex Price (US$/oz)
Silver 09/06/2017 17.3 (2.2) 4.8 1.7 5.8
Aluminium 09/06/2017 1,456 (1.6) (7.7) (30.1) (34.0)
Copper 09/06/2017 277 (9.4) (19.2) (15.4) (14.1)
LME Warehouse
Zinc 09/06/2017 323 (2.0) (5.6) (15.6) (24.5)
Stock
(ton) Lead 09/06/2017 177 (1.3) 0.3 (6.9) (9.1)
Nickel 09/06/2017 377 (1.7) (1.0) (2.3) 1.5
Tin 09/06/2017 1.9 0.0 (16.6) (60.6) (49.0)
Non-Commercial Gold 06/06/2017 214,101 24.6 15.7 27.4 134.8
Combined Positions
(contracts) Silver 06/06/2017 65,310 8.1 (9.1) (31.1) 11.1
Gold 09/06/2017 60.7 1.2 1.7 3.8 6.2
ETF Holdings (t oz)
Silver 09/06/2017 668 (0.1) 2.4 3.8 2.3
Source: Bloomberg Finance L.P., DBS Bank

Key data – Macro

Last Change (%)
updated Latest 1-week 1-month 3-month YTD
DXY Index 09/06/2017 97.3 0.3 (2.1) (4.1) (5.0)
Currency USD/CNY 09/06/2017 6.8 0.1 1.5 1.7 2.2
USD/KRW 09/06/2017 1,123 (0.7) 0.1 1.6 7.0
S&P500 Index 09/06/2017 2,432 (0.3) 1.7 2.5 8.6
Korea S&P500 Steel 09/06/2017 140 1.9 4.3 (1.4) 0.5
KOSPI Steel 09/06/2017 1,009 1.4 4.5 1.2 3.8
Index Baltic Dry Index 09/06/2017 849 2.3 (16.3) (21.8) (11.7)
Last Change (%)
Monthly updated Latest 1-month 3-month 1-year YTD
PMI 31/05/2017 51.2 0.0 (0.8) 2.2 (0.4)
Satellite Manufacturing Index 07/06/2017 49.6 (1.6) (4.3) 2.8 (2.8)
Real Estate Climate Index 30/04/2017 101 0.1 0.5 0.7 0.2
Real Estate Average Sales Price –
2
China Beijing (RMB/m ) 30/04/2017 43,254 6.3 8.8 33.2 10.0
Real Estate Development
Investment (y-o-y %) 30/04/2017 9.3 N/A N/A N/A N/A
Fixed Assets Investment (y-o-y %) 30/04/2017 8.9 N/A N/A N/A N/A
Infrastructure Investment (y-o-
y %) 30/04/2017 23.3 N/A N/A N/A N/A
PMI 31/05/2017 49.2 (0.4) 0.0 (1.8) (0.4)
Construction orders (m KRW) 30/04/2017 14,073 55.3 64.6 29.7 (27.6)
Korea Construction completed (m KRW) 30/04/2017 11,272 (6.0) 25.4 24.9 (19.3)
Automobile production (number) 30/04/2017 382,566 (0.1) 0.3 0.0 (0.1)
Automobile exports (number) 30/04/2017 239,393 (0.0) 0.3 0.1 (0.2)
World Shipbuilding Orderbook 30/04/2017 79,389 (3.9) (9.0) (25.2) (10.3)
(k CGT) New order 30/04/2017 745 25.5 28.3 22.9 145.8
Source: Bloomberg Finance L.P., Clarkson Research, KAMA, DBS Bank

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Regional Industry Focus
Regional Steel

Stock Performance

Steel share prices

Korea POSCO HYUNDAI SEAH KOREA ZINC POONGSAN NIPPON STEEL JFE TOKYO STEEL
STEEL CO BESTEEL CO LTD CORP CORP HOLDINGS MFG CO LTD
CORP INC
1wk % 1.3 4.3 1.2 (0.6) 1.9 1.3 0.1 1.0
1month % 2.2 8.8 3.1 4.1 2.5 (2.5) (0.2) 0.6
3month % (0.9) (2.4) 2.3 11.4 7.3 (10.8) (9.6) (8.3)
YTD % 8.2 6.5 11.5 (6.3) 1.0 (6.4) 6.1 (0.4)
1 year % 32.0 26.5 6.9 (9.8) 35.9 24.7 38.6 53.4
HK/China BAOSHAN ANGANG MAANSHAN UNITED NUCOR CORP ARCELORMITT TATA STEEL CHINA STEEL
/Others IRON & STEEL STEEL CO IRON & STATES STEEL AL-NY LIMITED CORP
CO-A LTD-H STEEL-H CORP REGISTERED

1wk % 1.9 (0.6) (1.4) 4.1 1.6 (0.6) 3.5 (0.6)

1month % 10.8 4.1 8.7 9.2 4.5 (3.4) 16.4 1.9
3month % (5.1) (14.6) (7.7) (38.8) (1.3) (20.7) 8.7 (4.3)
YTD % 2.0 10.0 22.1 (33.7) 0.6 (3.8) 29.9 (1.2)
1 year % 28.8 57.9 79.2 28.0 19.8 37.1 57.4 17.3
Based on share prices as of 12 June.
Source: Bloomberg Finance L.P., DBS Bank

Share price: US Steel vs. Nucor Share price: Tata Steel vs. China Steel
(US$) (IDR) (TWD)
70 US Steel Nucor 800 Tata Steel (L) China Steel (R) 35
33
60 700
31
50 600 29
40 500 27
25
30 400 23
20 300 21
19
10 200
17
0 100 15
11.1 12.1 13.1 14.1 15.1 16.1 17.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

Share price: POSCO vs. Hyundai Steel Share price: BaoSteel vs. Angang
(k KRW) (k KRW) (HK$) (RMB)
700 POSCO (L) Hyundai Steel (R) 160 Angang(L) BaoSteel(R)
20 12
600 140 18
16 10
500 120
100 14 8
400 12
80 10 6
300
60 8
200 6 4
40
100 4 2
20
2
0 0 0 0
11.1 12.1 13.1 14.1 15.1 16.1 17.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1

Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

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 Regional Industry Focus
Regional Steel

Major Prices
Spread between China HRC prices and spot iron ore prices Steel mills’ margins vs. HRC prices and input cost
(US$/ton) Spread (L) (US$/ton) (US$/ton) Spread (US$/ton)
Bench mark HRC prices
HRC benchmark prices (L) 800 450
700 250 Input cost of iron ore and coking coal per ton of steel
China import Iron Ore Fines 62% Fe spot(R)
700 400
600 200
600 350
500 300
150 500
400 250
100 400
300 200
300
50 150
200
200 100
100 0
100 50
0 -50 0 0
10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

Spot iron ore prices China: Coke price & spot coking coal prices
(US$/ton) Iron Ore delivered to Qingdao China - 62% Ferrous (RMB/ton) Chin a Foun dry Coke Domestic Spot Price (US$/ton)
Shanghai(L )
250 Content (L) 2,800 SBB Premium H ard JM 25 Coking Coal C hina 350
Iron Ores Fines 63.5% Fe Offshore Export Price Import (CFR Jingtang por t)
200 India to China CIF 2,400 SBB Hard C oki ng Coal A ustr alia Exp ort (FOB East 300
Coast p ort)
250
150 2,000
200
100 1,600
150
50 1,200 100
0
800 50
10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1 10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

Steel scrap prices HRC prices by region

(US$/ton) SBB US domestic Shredded Obsolete Scrap Hot rolled coil, World Export Market
(US$/ton)
600 (Delivered Midwest mill) 1,000 USA East of Miss Hot rolled coil
SBB Turkey import Heavy Melt Scrap #1&2 Mainland China Hot rolled coil
900
500 80:20 (CFR Turkish port)
800
400 700
600
300
500
400
200
300
100 200
11.3 12.3 13.3 14.3 15.3 16.3 17.3 10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank

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Regional Industry Focus
Regional Steel

US: HRC & CRC prices CIS Export prices

(US$/ton) (US$/ton) Steel CIS Export HR coil $ per tonne Black
1,200 USA East of Miss Hot rolled coil 800 Sea/Baltic Sea
1,100 USA East of Miss Cold rolled coil Steel CIS Export CR coil $ per tonne Black
700 Sea/Baltic Sea
1,000
600
900
800 500
700 400
600
300
500
400 200
10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1 10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1
Source: Bloomberg Finance L.P., DBS Bank
Source: Bloomberg Finance L.P., DBS Bank

China: HR & CR prices China: Rebar & Wire rod prices

(RMB/ton) (RMB/ton)
CR Sheet 25mm Average 5,500 Steel Rebar 25mm Average
6,500
HR Sheet 25mm Average Wire Rod 25mm Average
5,000
5,500 4,500
4,000
4,500
3,500
3,500 3,000
2,500
2,500
2,000

1,500 1,500
10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1 10.1 11.1 12.1 13.1 14.1 15.1 16.1 17.1
Source: Bloomberg Finance L.P., DBS Bank
Source: Bloomberg Finance L.P., DBS Bank

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 Regional Industry Focus
Regional Steel

an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends

Completed Date: 14 Jun 2017 16:32:18 (SGT)

Dissemination Date: 15 Jun 2017 08:57:21 (SGT)

Sources for all charts and tables are DBS Bank unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank
Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the
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Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
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referred to in this report.

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 Regional Industry Focus
Regional Steel

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2
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proprietary positions in Jiangxi Copper, Angang Steel recommended in this report as of 31 May 2017.
2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services:

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Disclosure of previous investment recommendation produced:

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1
An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which
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2
Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a
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 Regional Industry Focus
Regional Steel

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Regional Industry Focus
Regional Steel

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