Commodity and Cyclical Plays


(Jiten Parmar) #470

Steel, what has changed, except for a tweet. ? Negotiations will go on, proposals will be watered down.

Copper also remains strong, IMHO.


(ASPN) #471

Sorry for the dumb question Jiten. Which tweet you are referring to? I am interpreting that both steel and copper are in strong upmove, right?

Rgds.


(Bhavesh) #472

Is someone tracking hydrogen peroxide? Ground level check suggests prices have risen steeply in last three months from Rs 30 /kg to Rs 65-86/kg for the standard 50% grade. Traders suggests shortage in the domestic market due to local players exporting, but unsure how reliable. Now, National Peroxide is a company that makes this product. It is the largest producer in India. It reported Dec quarter realization at Rs32/kg. So realization can be much higher in the coming quarters.
I can gather Indian demand supply but can’t get a hang on global demand supply.
Views invited.


(Raj A A) #473

He is referring to the tweet by Donald Trump. The new trend in USA is policies are first discussed in social media. Today there is a new Tweet by him that he is eager to accommodate the western firends concern who stood by him at all times. As prophetically stated by Mr Jiten, negotiations will water down the proposals. Good Luck


(Mayank Narula) #474

Meghmani organics is putting up a H2O2 plant. Capacity is expected to come live by Dec 2018.


(Satyamtaneja) #475

I did an industry analysis a few months ago-I am not sure if H2O2 can be exported. Its highly toxic and extremely hard to transport. I remember there’s hardly any sea trade of H2O2. I would suggest verifying the export theory.

However, I remember there is a shortage in the Indian markets and buyers don’t have power due to lack of options, so in general prices could firm up if demand goes up since production is limited.


(Jiten Parmar) #476

Thanks for pointing this. I will try to gather more info on this from my industry contacts.


(malayruparel) #477

https://www.hellenicshippingnews.com/steel-output-cuts-the-new-normal-in-smog-prone-china/


(Hashims) #478

How does this may have impact on Indian Copper industry and demand?


(Bhavesh) #479

Hi, there have been imports of these products into India and it is stated in National Peroxide last five - six annual reports. Also, in July 2017, anti dumping duty was imposed by India. So, if imports are coming then I believe exports are also possible here. However, traders do validate your point that it needs specialized bags to transport the material.


(rajeev kumar choudhary) #480

Gujarat alkali and chemicals also manufactures peroxide


(VP_amit) #481

Hi Jiten - so what is your estimate of 1) Graphite India peak earning and 2) HEG peak earning?

Are you still looking to accumulate these or have you have sold off?

Thanks


(Raj A A) #482

Con call of meghmani indicates that H2O2 project (100Cr capex) is well on track and expected to add value from FY 20. Chloromethane plant (40000 MTPA) is expected to be commissioned by Dec 2018.
I am unable to correlate the Dec 18 with H2O2. can u provide the source of your info. Thanks.


(Jiten Parmar) #483

No positions currently in any GE players.


(Gaurav Agarwal) #484

Graphite electrode prices currently around Rs. 950/kg.


(madhavikkutti) #485

That translates into USD 14,600 per ton approximately for GE. I am not very sure about the current needle coke prices, as latest info on the same is not available to me. As per my calculations, for Graphite india, realization for GE during Q3 was around USD 6,600 per MT and needle coke around USD 1,270 per MT. That means, it was approximately 20% of the GE cost for needle coke. Hence, for USD 14,600 of GE cost, needle coke cost works out to be USD 2,920 per ton. Assuming that, other costs involved in the production of GE would be more or less fixed (on par with Q3) and the GE and the needle coke prices stay as mentioned above during FY19, I calculate an EPS of Rs. 197 for FY19 which is 7.4 times the current TTM EPS.


(Raj A A) #486

Copper as an Inflation Hedge
Every year, a vast amount of copper is used by the global economy to manufacture a wide variety of goods.
Copper outperformed every major asset class aside from energy - a type of asset that tends to increase rapidly during inflationary periods as well, though usually with high volatility. Copper also outperformed gold during rising consumer prices, tripling the 5.2% gain logged by gold.


(Raj A A) #487

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(vinayohara) #488

hi Jiten,

Do you mean 6-8 times of previous cycle peak earnings?
If i am wrong can you elaborate a little more?

thanks and regards
vinay


(Jiten Parmar) #489

I try to do for current cycle. And that does require deep understanding of industry. Tailwinds, headwinds, supply, demand scenario. And some personal judgement too.

But, doing it for past cycle also may not be a bad idea, if one is not able to come up with the nos for current cycle.

The most important thing in cyclical/commodity investing is getting in early. Chances of big erosion of capital is always there if one enters late. As upcycles and downcycles are never linear. And one get’s intermittent corrections on both sides. The problem is understanding whether it’s an intermittent correction or a change of cycle.

So, basically, never try to milk the full cycle, and leave some potential gains on the table. Basically, getting out a bit early. As capital preservation should always be foremost in mind.