Russian Metal Stocks Surge on Upgrades, China Demand Outlook
By William Mauldin
Feb. 9 (Bloomberg) -- Russian metals and mining stocks climbed for a seventh day after Morgan Stanley upgraded steelmakers and investors speculated demand is returning in China.
OAO Severstal, Russia’s biggest steelmaker, jumped to the highest in almost four months, while OAO Mechel rallied 17 percent after Morgan Stanley recommended the shares, citing higher demand and lower costs. OAO Raspadskaya, which makes coking coal for the steel industry, surged 16 percent.
The Micex Metal & Mining Index jumped 4.9 percent to 1,714.35 at the close in Moscow, gaining 36 percent in seven days, the longest winning streak in two months. The broader Micex Index rose for a second day, adding 6.5 percent as oil and gas companies also increased. The RTS Index added 9.3 percent, its biggest advance in more than two months.
“There is hope for a recovery based on China,” said Constantin Demchenko, head of trading at Everest Asset Management in Moscow. “All international names were buying.”
Severstal shares climbed 5.5 percent to 149.61 rubles on the Micex Stock Exchange after Morgan Stanley upgraded the stock to “overweight” from “equal-weight.”
Mechel, the coal and steel producer controlled by billionaire Igor Zyuzin, increased 17 percent to 171.96 rubles in Moscow, the most since the stock began trading on the Micex this year. Morgan Stanley raised the stock to “overweight” from “underweight.”
‘Marked Pickup’
“It is now clear that there has been a marked pickup in export volumes for Russian steel producers,” Morgan Stanley analysts Dmitriy Kolomytsyn and Marina Zavolock in Moscow wrote in a report dated today. “Steel traders within China are also pointing to increased imports from Russia, indicating that Chinese buying has caused some Russian producers to sell out of April export shipments.”
Steelmakers are also benefiting from the ruble’s decline as their costs are based in the local currency, while revenue is dollar-based, said Morgan Stanley, which estimated the cost of Russia steelmaking is 40 percent below the world average. The ruble fell 35 percent against the dollar since July 14.
Raspadskaya jumped 16 percent to 39.63 rubles.
Iron Ore Climbs
Chinese iron ore spot prices jumped 5 percent last week, the biggest gain this year. The price is quoted once a week. Iron ore is recovering from a three-year low just as Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd. start talks with Asian steelmakers to set prices for annual supply contracts.
The Baltic Dry Index, a measure of the cost to ship commodities that’s used as a gauge for demand, advanced for 14 consecutive days, closing up 9.6 percent on Feb. 6.
OAO GMK Norilsk Nickel, Russia’s biggest mining company, rose 4.2 percent to $4.18 in London. Nickel for three-month delivery rose for a second day on the London Metal Exchange. Copper also gained.
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