Indian steel companies would continue to see a tough quarter. The key issue facing the industry is the weaker domestic steel demand which has kept the domestic prices under pressure, according to Nomura Equity Research in its Quick Note
In the Indian steel sector seasonal strength should help, but 4QFY13 would still be a tough quarter, according to Nomura Equity Research in its Quick Note. It is expected that Indian steel companies would continue to see earnings pressure in 4QFY13 given domestic steel prices remained weak despite higher global prices. However, the fourth quarter is typically the strongest demand period and, hence, it is expected that sales volumes will pick up sequentially.
Nomura expects SAIL volumes at 3.2 million tonnes (mt), up 16.4% quarter-on-quarter but flat year-on-year. Tata Steel has also seen volumes increasing by 20.8% quarter-on-quarter and 29% year-on-year on account of the ramp-up of the 2.9mtpa expansion. However, JSW Steel should see flat volumes given production is still constrained by Karnataka iron ore shortage.
Indian steel demand growth remained weak in 4QFY13, resulting in sustained weakness in steel prices, remark Nomura analysts. While companies should see sequential improvement in volumes on account of a seasonally strong demand period in 4Q, volume growth year-on-year should be muted. Indian steel demand growth during FY13 was just 3.3% and 4QFY13 demand growth was even weaker at about 1.5% as per Joint Plant Committee data.
A weaker demand environment has kept domestic steel prices weak during the quarter despite global steel prices increasing by 6-7% quarter-on-quarter. As per Nomura’s interaction with the management of Indian steel companies and steel traders, it is expected that flat steel prices will be marginally weak (down Rs300-500 per tonne (1%-2%) quarter-on-quarter) while long product prices remained largely flat quarter-on-quarter.
Expect residual benefits of lower coking coal prices in 4QFY13
Nomura expects companies to realize a further $8-10/t of benefits from the fall in coking coal prices during 4QFY13. The impact of change in contract coking coal prices is realized by the companies with a lag of 0.5-1 quarter. Coking coal prices have been falling for the past 3-4 quarters and, hence, the benefit would continue in 4QFY13.
Nomura expects Tata Steel to see a quarter-on-quarter improvement given its Indian operations should see higher volumes though profitability would remain under pressure. At the same time, the European operations should turn EBITDA positive (about $15/t) on the back of stable steel prices and fall in raw material costs. Nomura expects consolidated EBITDA of Rs33.5 billion, up 5.4% year-on-year and 49.6% quarter-on-quarter.
The analysts expect Tata Steel’s Indian operations to report EBITDA of Rs30 billion in 4QFY13, up 18.7% quarter-on-quarter but flat year-on-year. Sequential EBITDA growth would be driven primarily by 20.8% volume growth on account of ramp-up of 2.9mtpa production. While profitability would be supported by 1) lower coke purchases, 2) fall in coking coal prices, and 3) operating leverage on account of higher volumes, there are neutralizing factors, i.e., 1) weaker steel realizations, 2) lower ferroalloy contribution due to production shutdown at Sukinda mine, and 3) weaker product mix (as TATA Steel is currently producing basic HR coils from incremental capacity.
Key estimates of Nomura analysts in the steel sector are given below:
Weaker LME prices are likely to keep profitability under pressure for Indian non-ferrous companies, says Nomura Equity Research in its Quick Note
Indian non-ferrous companies should see an improved quarter on the back of higher production; however weaker LME (London Metal Exchange) prices are likely to keep profitability under pressure, says Nomura Equity Research in its Quick Note.
LME aluminium prices have been flat quarter-on-quarter and down 8% year-on-year, while zinc prices are up 3% quarter-on-quarter and flat year-on-year and lead prices are up 4.5% quarter-on-quarter and 9% year-on-year.
Nomura expects Hindustan Zinc to see a very strong quarter driven by record mined metal production (up 16.6% quarter-on-quarter and 27.5% year-on-year). At the same time, integrates lead and silver productions are also up 3.2% and 20.7% year-on-year, respectively. As a result the brokerage forecasts EBITDA at Rs18 billion, up 8.4% year-on-year and 20.4% quarter-on-quarter.
Nomura also expects Hindalco Industries to see an improved quarter with aluminium production at 145kt up 4.3% quarter-on-quarter and flat year-on-year. Hindalco should report EBITDA of Rs6.5 billion up 11.6% quarter-on-quarter, though still down 24.9% year-on-year (on account of lower aluminium prices).
Sterlite Industries should also see a strong quarter driven by improved zinc and power business. We forecast EBITDA at Rs26.7 billion up 14.8% quarter-on-quarter but down 1.3% year-on-year.
Sesa Goa’s iron ore operations remain suspended on account of the continued mining ban in Goa and Karnataka. The company reported pig iron production of 104kt (kilo tonnes), up 25.5% quarter-on-quarter and 76.2% year-on-year. However, as per management, the company had to purchase external iron ore for the production and hence profitability would be impacted.
Quarterly previews of the four companies are given below by Nomura analysts:
Defense attorneys for men accused of terrorism before military commissions at Guantanamo Bay believe their email communications have been searched and even tampered with
The long-troubled military trials at Guantanamo Bay were hit by revelations earlier this year that a secret censor had the ability to cut off courtroom proceedings, and that there were listening devices disguised as smoke detectors in attorney-client meeting rooms.
Now, another potential instance of compromised confidentiality at the military commissions has emerged: Defense attorneys say somebody has accessed their email and servers.
“Defense emails have ended up being provided to the prosecution, material has disappeared off the defense server, and sometimes reappeared, in different formats, or with different names,” said Rick Kammen, a lawyer for Abd Al Rahim Al Nashiri, who is accused of plotting the 2000 attack on the U.S.S. Cole.
The lawyers say they don’t know exactly who is accessing their communications. And it’s not yet clear whether the emails were intentionally grabbed or were scooped up mistakenly due to technical or procedural errors.
Either way, the lawyers are concerned.
In response to the apparent breaches, the military’s chief defense counsel ordered defense lawyers to stop using email for privileged or confidential communications.
“This follows on the heels of the seizure of over 500,000 e-mail containing attorney-client privileged communications as well as the loss of significant amount of defense work-product contained in shared folders,” Commander Walter Ruiz, one of the military defense counsels, said in an email.
The search of thousands of emails was revealed by the prosecution, attorneys say.
“The searches on their face looked to be fairly benign,” Kammen said. The defense emails turned up when prosecutors requested a search of prosecutors’ own emails. “The people who were doing the searches ended up providing all manner of defense material as well." It’s not clear what department, agency, or office did the search.
It is not possible to corroborate the attorneys’ accounts because the full documents are undergoing security review, and are not yet public.
The Pentagon declined to comment, citing the ongoing trial.
In recent months, defense lawyers also realized that files were missing from their shared and personal servers. There is no evidence that the missing files are connected to the email searches.
“The main thing is that the integrity of the system as the whole is in very serious question,” said Commander Ruiz. The order to stop using servers and emails, “essentially cripples our ability to operate,” he said.
Hearings in Nashiri’s case were scheduled for next week, but in response to a motion from his lawyers, military judge James Pohl has delayed the hearings for two months. Yesterday, lawyers for the 9/11 plotters also filed a motion regarding “Information Technology Corruption and Loss of Relevant Defense Files.”
These new concerns are the latest example of irregularities of military commissions overshadowing the actual facts of the cases brought before them. Pretrial hearings have been consumed by issues such as whether defendants can wear camouflage to court (they can), when mail can be read, and what exactly lawyers can discuss with or send their clients. The prosecution has also tried to prohibit “informational contraband,” including any material on “current political or military events in any country; historical perspectives or discussions on jihadist activities.” Copies of the 9/11 Commission Report and the memoirs of an FBI agent have been taken from defendants’ cells.
In cases before the commissions, defendants’ interactions with their attorneys are subject to strict controls. Orders aimed at protecting classified information govern most proceedings and lawyers have limited access to their clients. Defense lawyers previously had to get a security officer’s approval to use even mundane information from defendants. That requirement was loosened a bit, but details of the defendants’ time in CIA custody – including their own accounts of being tortured – are automatically classified.
There have been seven convictions under the military commissions. Another seven detainees are currently facing charges, and 24 others may yet be prosecuted. The government has deemed 46 detainees simply too dangerous to release but doesn’t plan to try them.
The Obama administration initially sought to try Khalid Sheikh Mohammed and the four other alleged 9/11 plotters in federal court in Manhattan, but reversed its position after heated opposition from Congress and New York City officials.
Though President Obama has thus far failed to fulfill his pledge to close Guantanamo, no one has been brought to the prison under the Obama administration. In recent months, a string of terror suspects have been extradited from foreign countries to face charges in U.S. courts.