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1、Buy,Buy,Buy,Buy,Buy,Buy,Hold,Buy,Deutsche BankMarkets Research,Global Emerging MarketsBrazilMetals&Mining,PeriodicalWhats next,Date5 November 2012Rodrigo Barros,Latam M and(iii)possible port agreements could be signed by MMX.Crystal ball,Research Analyst(+55)11 2113-Leandro CappaResearch Analyst(+55
2、)11 2113-Top picksGerdau(GGB.N),USD8.76Usiminas(USIM5.SA),BRL10.27MMXM11(MMXM11.SA),BRL3.20Companies FeaturedVale(VALE.N),USD18.55Gerdau(GGB.N),USD8.76Ternium(TX.N),USD21.18CSN(SID.N),USD5.64Usiminas(USIM5.SA),BRL10.273Q12 Earnings calendar,We estimate February 2013 EBITDA/t for Chinese HRC at USD17
3、(+USD4 vs.previous week)and for European HRC at USD52(-USD8 vs.previous week).Assuming current prices remain stable,June 2013 EBITDA/t would be,respectively,USD14 and USD49.,TerniumMMXMagnesitaBradespar,Nov 6Nov 7Nov 8Nov 11,Weekly recapThe main highlights from last week were:(i)IODEX closed on Frid
4、ay atUSD122.0/dmt,USD1.5/dmt higher vs.previous weeks close,(ii)Usiminas,CSN and Gerdau published 3Q12 results,and(iii)MMX announced that BNDESapproved the allocation of a long-term financing package for the Serra Azulproject.Valuation and risksWe value LatAm Metals&Mining stocks using DCF as a prim
5、ary methodology.For WACC calculation,we assume a 5%market risk premium and a 4%risk-free rate.For the steelmakers,we incorporate a multiple component tocalculate the target prices in addition to the DCF.Key risks include currency,project delays,overpaying for acquisitions,and slower-than-expected gl
6、obaleconomic growth.More on valuation and risks on page 18._Deutsche Bank Securities Inc.All prices are those current at the end of the previous trading session unless otherwise indicated.Prices are sourcedfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deutsche Ban
7、k and subjectcompanies.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single facto
8、r in making their investment decision.DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,5 November 2012Metals and(iii)iron ore exports starting on 2H13.We expect turnaround efforts tostart showing in 2013 results.MMXM11:The Time is NowWe expect important catalysts t
9、o materialize for MMXM11 in the short run which are:(i)potential agreement to supply port capacity to Gerdaus iron ore project announced lastweek,(ii)potential pre-sale of bulk port capacity to trading companies and(iii)asuccessful inauguration of Porto Sudeste by mid 2013.Also,we believe that thesu
10、ccessful execution of the Sudeste Port project would have a positive effect on riskperception towards MMXM11 and for the EBX group as a whole.We have MMXM11 asa Top Pick,together with Gerdau and Usiminas.,Page2,Deutsche Bank Securities Inc.,5 November 2012Metals Usiminas,Gerdau and MMXM11 TopPicks,W
11、e reiterate our preference for the steel sector vs.mining and our three Top Picks areUsiminas,Gerdau and MMXM11.In our view these companies should benefit not onlyfrom market trends,but from specific catalysts that we expect to materialize in the nextsix months.UsiminasThe investment case for Usimin
12、as is very simple we expect the companys EBITDA toreach BRL3.0bn in 2015 due to improving volumes,higher efficiency and iron oreexports.In this scenario,Usiminas would be the cheapest Brazilian steelmaker in 2015on an EV/EBITDA valuation approach.In addition,Usiminas is the steelmaker with thehighes
13、t leverage to the recovery of Brazilian GDP growth.GerdauWe believe that Gerdau results were not as weak as they initially seem:the lowerresults in the U.S.occurred because of FIFO accounting and the specialty steel segmentis expected to recover strongly next year(we forecast truck production in Bra
14、zil toincrease by 22%in 2013).We also expect Gerdau to sign a fair port contract soon(cUSD15/t),which would bring the valuation of the iron ore business back to thecompanys stock price.MMXM11We estimate that at current price MMXM11 offers a yield higher than 16%assumingiron ore volumes of 46mtpy in
15、2018.While investors seem to be skeptical about thecompany reaching some volume targets,we think that a potential partnership withGerdau would lead to a significant reduction in the execution risk perception.Our callsWe believe that our main three Top Picks differ from consensus preference list,whic
16、hremains negative on the steel sector because of the weak results reported for the 3Q12.As for MMXM11,we highlight the fact that in our view this is the asset that potentiallycould bring significant positive news for the EBX group in the short run.Specific recommendationsWe recommend investors to en
17、ter long positions in USIM5,GGB and MMXM11.Wealso recommend the following relative trades:USIM5 vs.VALE,USIM5 vs.SID,MMXM11 vs.MMXM3,GGB+USIM5 vs.SID,MMXM11 vs.VALE.Deutsche Bank Securities Inc.,Report published onNovember 1st,2012,Page3,5 November 2012Metals&MiningWhats nextVale and Bradespar:Updat
18、ingCapex estimatesVale and Bradespar:3Q12 and Capex update,In this report we finetune our forecasts for Vale and Bradespar to incorporate 3Q12results,new capex estimates and,in the case of Bradespar,review the methodology forvaluing CPFL.Our 12-month target price for VALE remains unchanged at USD24/
19、ADRand in the case of Bradespar our new TP is BRL40.We maintain our Buy rating on bothcompanies.Capex now estimated at USD16.4bn in 2013Vales management made it clear in the companys 3Q12 earnings call that thecompany will reduce capex in the years ahead.Our model now assumes capex ofUSD17.0bn for 2
20、012(-10%vs prior)and USD16.4bn for 2013(-26%vs prior)as webasically postponed all non-iron ore projects disbursements.We expect Vale toannounce further details of its capex plan on December 3rd,2012 during its annualInvestor day to be held in New York.Dividend in 2013 estimated at USD3.4bn(3.6%yield
21、)In our calculations Vale would have to pay USD3.4bn in dividends next year(3.6%yield)so that its controlling shareholder,Valepar,is able to pay the principal and interestassociated with redeemable shares issued in 2008.Such shares provided the funds thatValepar used to participate in Vales equity o
22、ffering in the same year.Valuation and RisksWe value Latam Mining stocks using the discounted cash flow methodology.For theWACC calculation,we assume a 5%market risk premium and a 3%risk-free rate.Keyrisks include currency,project delays,overpaying for acquisitions,and slower-than-expected global ec
23、onomic growth.For further information on risks and valuation,pleasesee pages 2 and 6.Page4,Report published onNovember 1st,2012Deutsche Bank Securities Inc.,5 November 2012Metals&MiningWhats nextThe Time is NowMMXM11 now a Top Pick,We rate MMXM11 a Top Pick in the LatAm Metals and(iii)lack of gross
24、profit from the ports operation to pay royalties toMMXM11.Key upside risk to our forecasts is the ports expansion to 100mtpyDeutsche Bank Securities Inc.,Report published onNovember 1st,2012,Page5,5 November 2012Metals&MiningWhats nextImport parity calculationCRC premium at 13%,Figure 1:Hot rolled s
25、heet domestic premium0,Figure 2:Cold rolled sheet domestic premium0,-10%,-5%discount,5%premium,10%,-10%,-5%discount,5%premium,10%,Source:Deutsche BankFigure 3:Rebar domestic premium0,Source:Deutsche BankFigure 4:Heavy plate domestic premium0,-10%,-5%discount,5%premium,10%,-10%,-5%discount,5%premium,
26、10%,Source:Deutsche BankPage6,Source:Deutsche Bank,Deutsche Bank Securities Inc.,5 November 2012Metals&MiningWhats nextCrystal ballM&M leading indicatorsSwap curve analysisRebar future pricing for February 2013 stands at USD585/t(-USD2 vs.previous week)and for June 2013,at USD590/t(-USD6 vs.previous
27、 week).Iron ore futures(SingaporeExchange)for the same dates stand,respectively,at USD116/dmt(flat vs.previousweek),and USD114/dmt(-USD1 vs.previous week).Profitability outlookWe estimate January 2013 EBITDA/t for Chinese HRC at USD17(+USD4 vs.previousweek)and for European HRC at USD52(-USD8 vs.prev
28、ious week).Assuming current,prices,remain,stable,June,2013,EBITDA/t,would,be,respectively,USD14 and USD49.Scrap vs.iron ore/cokeThe current ratio of scrap to iron ore/coke stands at 1.44(+9.8%vs.October),while theten-year average is 1.26.According to our calculation,scrap is more expensive than iron
29、ore and coal at this time.Historical spreadsMetal spreads in the US suggest that the current spreads are below the long-runaverage.Price above raw material in Europe is higher than the long-run average andprice above raw material in China is also higher than the long-run average.Vale ports lineupThe
30、 current lineup of Vales ships suggests iron ore exports of 22.6mt in November2012(excluding Samarco).At the same time last month,export forecasts for Octoberwere 20.6mt.,Deutsche Bank Securities Inc.,Page7,(USD/t),(USD/t),Jan-13,May-13,Dec-12,Mar-13,Jun-13,Feb-13,Apr-13,Jul-13,Aug-13,Jan-13,May-13,
31、Mar-13,Dec-12,Jun-13,Feb-13,Apr-13,Jul-13,Aug-13,Aug-13,(USD/t),(USD/t),Jan-13,May-13,Mar-13,Dec-12,Jun-13,Feb-13,Apr-13,Jul-13,Aug-13,Jan-13,May-13,Apr-13,Mar-13,Dec-12,Jun-13,Feb-13,Jul-13,(USD/t),Oct-10,Oct-11,Oct-12,Apr-10,Apr-11,Jun-10,Aug-10,Dec-10,Jun-11,Aug-11,Dec-11,Apr-12,Jun-12,Aug-12,Feb
32、-11,Feb-12,(USD/t),12/16/10,01/15/11,02/14/11,03/16/11,04/15/11,05/15/11,06/14/11,07/14/11,08/13/11,09/12/11,10/12/11,11/11/11,12/11/11,01/10/12,02/09/12,03/10/12,04/09/12,05/09/12,06/08/12,07/08/12,08/07/12,09/06/12,10/06/12,11/05/12,5 November 2012Metals&MiningWhats nextM&M dashboardFigure 5:Cryst
33、al ball,Exihibit 1:Rebar futures620600580560540520500,Exihibit 2:Iron ore forwards120115110105100959085,8/28/2012,9/28/2012,10/29/2012,8/28/2012,9/28/2012,10/29/2012,Source:Bloomberg Finance LP and Deutsche BankExihibit 3:Chinese profitability560555550545540535530525,Source:Bloomberg Finance LP and
34、Singapure Exchange LtdExihibit 4:European profitability660650640630620610600590,Chinese HRC cost,Current HRC price,European HRC cost,Current HRC price,Source:Platts,MetalBulletin,Bloomberg Finance LP and Deutsche BankExhibit 5:Scrap vs.iron ore&coke1.9,Source:Platts,MetalBulletin,Bloomberg Finance L
35、P and Deutsche BankExhibit 6:Historical spreads,1.71.51.31.10.9,Spr e a ds(USD/t)Slab-PigMetal Spread(Flat,USA)Blast Furnace Spread HRC,ChinaBlast Furnace Spread,EuropePig-Scrap ShreddedHRC-Slab,GermanyCRC-HRC,GermanyHRC US-Germany,Cur r e nt98274287348613010641,10y av1213452283417612810120,7y av130
36、370228361911481032,5y av12136422334710615395-16,Scrap/(Iron Ore+Coal)Source:Platts,SBB and Deutsche BankExhibit 7:Ports lineup,10y average,Source:Platts,MetalBulletin and Deutsche BankExhibit 8:Pellet premium,(0 0 0 t)Ponta da MadeiraTubaraoItaguai,Nov-1 29,8917,6671,349,De c-1 21,6171,6850,Tota l11
37、,5089,3521,349,6560555045,Guaiba 3,658Tota l 2 2,5 6 5Source:Vale and Deutsche Bank,2603,5 6 2,3,9182 6,1 2 7,40353025,20Pellet PremiumSource:MySteel,SteelHome and Deutsche Bank,Page8,Deutsche Bank Securities Inc.,5 November 2012Metals Balance sheet improving”published on November 1st.,Deutsche Bank
38、 Securities Inc.,Page9,(USD/wmt),(USD/t),13-Aug-10,13-Aug-11,13-Aug-12,13-Jun-11,13-Jun-12,13-Oct-10,13-Oct-11,13-Dec-10,13-Dec-11,13-Feb-11,(USD/t),Aug-09,Oct-09,Dec-09,Aug-10,Oct-10,Dec-10,Jun-09,Aug-11,Oct-11,Dec-11,Jun-10,Aug-12,Oct-12,Dec-12,Jun-11,Feb-09,Feb-10,Feb-11,Feb-12,Jun-12,Apr-09,Apr-
39、10,Apr-11,Apr-12,Feb-13,13-Feb-12,13-Oct-12,13-Apr-11,13-Apr-12,26-Aug-10,26-Aug-11,26-Aug-12,26-Oct-10,26-Oct-11,26-Dec-10,26-Dec-11,26-Feb-11,26-Feb-12,26-Oct-12,26-Jun-11,26-Jun-12,26-Apr-11,26-Apr-12,5 November 2012Metals&MiningWhats nextSector data,Figure 6:Iron ore prices2001801601401201008060
40、SGX Platts iron ore 1-month forward(USD/dmt),Figure 7:Freight price spread2015105,Vales iron ore fob Brazil(USD/wmt)Source:Platts and Deutsche Bank calculationsFigure 8:Iron ore contract pricingA200180160140120100806040Contract price CFR China(USD/dmt),Brazil-Australia spreadSource:Platts and Deutsc
41、he Bank calculationsQuarterly pricingIron ore spot price 62%Fe(USD/dmt),TTM average spread,Source:Platts,SGX AsiaClear and Deutsche Bank calculations.Iron ore futures pricing as of 13 July 2012,Page10,Deutsche Bank Securities Inc.,(mt),(mt),Oct-11,Dec-10,Dec-11,Oct-10,Aug-11,Aug-10,30-Jun-10,30-Jun-
42、11,31-Dec-10,31-Dec-11,28-Feb-11,29-Feb-12,30-Jun-12,30-Apr-10,30-Apr-11,30-Apr-12,31-Aug-10,31-Aug-11,31-Aug-12,31-Oct-10,31-Oct-11,(USD/t),(mt),27-Jun-11,27-Dec-10,27-Jun-12,27-Oct-10,27-Oct-11,Aug-12,Jun-10,Jun-11,Feb-11,Feb-12,Jun-12,Apr-11,Apr-12,27-Dec-11,27-Aug-10,27-Aug-11,17-Jun-11,17-Dec-1
43、1,17-Jun-12,17-Dec-10,17-Oct-10,17-Oct-11,17-Aug-10,17-Aug-11,17-Aug-12,17-Feb-11,17-Feb-12,17-Oct-12,17-Apr-11,17-Apr-12,(USD/t),21-Aug-09,21-Aug-10,21-Aug-11,21-Nov-09,21-Nov-10,21-May-10,21-May-11,21-Nov-11,21-May-12,21-Aug-12,21-Feb-10,21-Feb-11,21-Feb-12,(%),27-Aug-12,27-Feb-11,27-Feb-12,27-Oct
44、-12,27-Apr-11,27-Apr-12,5 November 2012Metals&MiningWhats next,Figure 9:China iron ore stockpiles,Figure 10:China iron ore imports,1009590858075706560,29%28%27%26%25%24%23%22%21%20%,706560555045403530,China iron ore imports,%Brazil,55%50%45%40%35%30%25%20%15%10%Australia,China iron ore stockpilesSou
45、rce:SteelHome and Deutsche BankFigure 11:Daily HRC China800750700650600550500,%Brazilian ore,Source:Bloomberg Finance LPFigure 12:China steel inventories9.59.08.58.07.57.06.56.05.55.0,Steel inventories in main cities,2-year average,Daily HRC price ChinaSource:Bloomberg Finance LPFigure 13:US metal s
46、pread450400350300250200150,5-year average817977757371696765,Source:Bloomberg Finance LP,1978-2007 average utilization(%)US Capacity Utilization(%)US metal spread(USD/t)8-year average metal spread(USD/t)Source:Bloomberg Finance LP,Deutsche Bank Securities Inc.,Page11,5 November 2012Metals&MiningWhats
47、 nextIron ore exports,BrazilFigure 14:Iron ore exports,Iron ore export volume(000t)AsiaAsia ex-Middle EastMiddle EastChinaJapanEUGermanyFranceBelgium+LuxembourgOther regionsTotal Brazilian exports%growth,4Q1172,45567,4824,97347,80611,66316,1583,5591,8097104,96193,5754%,1Q1253,29449,0374,25735,9296,0
48、9611,0872,2681,3478943,98668,368-27%,2Q1256,84752,3054,54236,9067,94815,5982,1601,2529835,79078,23514%,3Q1263,19758,0875,11141,8918,49113,8412,0442,5595765,41582,4535%,Apr-1217,77016,4291,34010,7763,1296,0436663824281,73325,546-7%,May-1219,76318,1951,56813,7962,3095,1151,0875563621,92526,8025%,Jun-1
49、219,31417,6811,63312,3342,5114,4404073141922,13225,886-3%,Jul-1220,75518,5632,19212,9432,9454,9126596913501,58427,2515%,Aug-1220,14418,9171,22714,4272,4125,2535148202262,13627,5321%,Sep-1222,29820,6071,69214,5213,1343,6768711,04901,69527,6701%,Source:SECEX and Deutsche BankSteel imports,BrazilFigure
50、 15:Flat steel imports,(000t)SlabsHeavy platesCoiled platesHot rolledCold rolledCoatedCanning platesHot dip galvanizedAluminum-zincPre-painted sheetSpecial-alloy steelTotalGrowth(MoM),3Q110.079.430.6125.3241.1200.020.4117.448.713.441.6718.059%,4Q110.053.631.9123.8109.9164.823.276.452.712.534.6518.6-
