Commodities: Basic Materials Roundup: Market Talk

The latest Market Talks covering Basic Materials. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

1046 ET – Steel companies are trading higher after the Commerce Department issued a preliminary ruling that steel from China has been circumventing US anti-dumping tariffs by being processed and shipped from Vietnam. The department says galvanized steel and cold-rolled steel from Vietnam that uses Chinese steel as a substrate should be subject to same US duties as steel imported from China. Imports from Vietnam have surged recently, attracting complaints from US steel companies that much of the steel shipped from there originated in countries subject to stiff US steel tariffs. “This decision should put other countries and companies on notice that their cheating will no longer be tolerated,” United States Steel Corp says. US Steel up 6.5%; AK Steel up 4.1% and Steel Dynamics ahead 2.1%. ([email protected]; @bob_tita)

0940 ET – The planned changes to the U.S. corporate tax system would have a limited negative impact on Wacker Chemie, says Warburg, as they would mostly erase tax credits which are used to foster investment in renewables. Under the worst-case scenario, the demise of the U.S. solar cell market would shrink the global market by 3% or 4% in 2018, the bank notes, lowering demand and prices for polysilicon, a material produced by the German chemicals company. Yet Warburg has not made any changes to the company’s estimates, as the final changes to the U.S. tax code may differ from the Senate bill. Warburg raises its target price to EUR147.30 from EUR144.60 and keeps a hold rating. ([email protected])

0932 ET – Zhuhai Port, a major gateway in the Pearl River Delta close to Macau, plans to raise $225M in a share issue that will be used to buy 55 ships for general cargo transport in Chinese coastal regions. The fleet expansion is aimed to transform the port operator into a logistics provider of coal, grain and iron ore to feed China’s fast growing coastal cities and cut the country’s reliance on chartered vessels, mainly from European operators. ([email protected])

0411 ET – Suez is likely to reap greater rewards than expected from its acquisition of GE Water, according to RBC Capital Markets. The bank thinks the recent IPO of U.S. competitor Evoqua sheds some light on how Suez will guide for the integration of the former GE unit. Evoqua’s expectation to increase margins by about 150 basis points a year to 2019, from a starting point of 16.6%, leaves GE Water’s 2016 Ebitda margin of 13% with much room for improvement, says the bank. RBC raises its long-term margin estimate to 18% by 2025, up from 15.5%, and increases its target price to EUR18 from EUR17.50. ([email protected])

0301 ET – Markets may be spooked by ongoing deleveraging in China, but Bank of America Merrill Lynch analysts believe there are no signs of distress so far. More telling is data showing that traditionally overleveraged sectors such as mining, steel and cement the debt-to-asset ratio was below 63% as of mid-2017. It was above 65% to end 2015. Fresh worries about Chinese commodities demand helped stoke Tuesday’s slide in metals prices and adds to pressure today in Asian stocks. ([email protected])

0159 ET – South Korea stocks also finished sharply lower on the twin hits from falling metals prices and fresh selling in tech companies. The Kospi fell 1.4% to 2472.37, finishing just off session lows. Samsung shed another 2.4% while steel was the biggest decliner at 3% on the commodity weakness seen overnight. ([email protected])

0031 ET – Australian stocks held up better than regional peers despite the overnight skid in metals prices and 3Q GDP having risen a bit less than many economists expected. The S&P/ASX 200 fell 0.4% to 5946.1, with resources and materials leading the decline. That as industrial-chemicals producer Incitec Pivot fell 1.8% after warning of a financial hit from being dropped as the supplier of ammonium nitrate to BHP. Meanwhile, some retailers which rallied yesterday after what was widely considered a lackluster launch by Amazon in Australia, gave up some of those gains. Bank stocks helped offset some of the weakness seen elsewhere in the local market. ([email protected]; @Mike_Cherney)

2114 ET – Shares of Chalco continue to pull back from yesterday’s brief jump that initially followed the Chinese aluminum firm’s CNY12.6 billion ($1.9 billion) capital injection. The debt-for-equity swap, which involves 8 investors including insurance firms and asset managers, should improve Chalco’s balance sheet and earnings, says Deutsche Bank. Its adds financing-cost savings should more than offset the stock dilution. Shares are down 3.1%, moving toward what would be a 4-month low. Also weighing is Tuesday declines in metals prices. ([email protected])

1956 ET – Woodside’s proposed change in strategy at its North West Shelf venture and plans to pipe offshore natural gas to an existing Western Australia plant could prompt BHP Billiton to exit the project over the next 3-5 years, Macquarie suggests. The NWS project continued to generate strong free cashflow for BHP and fits in with its portfolio of petroleum assets, but the shift in strategy might not sit well with BHP and an exit would release it from future development costs. Macquarie values BHP’s share of NWS at US$5B, far above the US$1.6B book value of net operating assets. ([email protected]; @RobbMStewart)

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