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Ukrainian steelmaker Metinvest explores bond sale as deadline for debt nears
Metinvest, the Ukrainian steel giant, is looking at a new debt issue to cover an upcoming bond payment of?nearly $430 million due in April. It has also been in talks about restructuring. Metinvest is Ukraine's biggest?private company. However, the four years of?punishing war with Russia have?seen?it lose around half of its operations. This includes some of its largest steel and coal plants. It paused discussions with a group bondholders earlier this month about restructuring its debt of $1,25 billion, saying that it would look at "alternative liabilities management transactions". Metinvest CEO Yuriyryzhenkov spoke about the four-year anniversary on Tuesday of the war and its impact. He also discussed the options for the financial situation. He said that the company was considering "many options", particularly after the poultry giant MHP became the first Ukrainian company to issue an international bond since the outbreak of the war in Ukraine 2022. Ryzhenkov said that he was listening to the market and what investors can accept. "We'd be happy to use a 3-year or 5-year bond. It depends on other details such as covenants and?costs of debt. We'll "have to strike a sort of balance." What is an acceptable cost? Metinvest will have to pay about 1-2 percentage points higher than the 10,5% MHP borrowed last month for $450 million spread over three years, according to bankers. Alan Siow, co-head of EM Corporate Debt for Ninety One, said that this would be a very high price, and it wouldn't be sustainable over the long run. It would allow the company to retain market access, and then refinance the debt at a lower rate if the situation improved. Ryzhenkov stated that Metinvest could also consider a private debt agreement, using existing resources or returning to the restructuring options discussed in recent months. Ryzhenkov said there was "leeway" on the amount it would have to borrow if it chose a bond. It must make a $428-million payment by April 23 but it has some cash that could be used. "Depending on market conditions, we could go for $300,000,000 (bonds) or $500, if we have good conversations and the cost is reasonable." A spokesperson from Deutsche Bank, who helped organize a roadshow for Metinvest investors recently, did not immediately respond to a question about the 'potential of a bond sale. Ryzhenkov stated that Metinvest had some time left before a decision was needed and that he took an optimistic outlook. He said: "Either we can find a market solution that will solve everything or we'll reach an agreement with creditors to reprofile our bond."
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Dalian iron ore prices fall as China resumes trading
The Dalian iron 'ore futures fell on Tuesday as a reaction to the fall in Singapore iron ores prices during the Lunar New Year holidays. The May contract for iron ore on China's Dalian Commodity Exchange traded 1.79 % lower at 740 yuan (US$107.40) per metric ton. As of 0704 GMT, the benchmark March iron ore traded on Singapore Exchange was up 0.78% at $96.6 per?ton. Trading on the DCE, SHFE and Singapore Exchange remained suspended between February 16 and 23 due to the Lunar New Year holiday. The benchmark Singapore Iron Ore contract lost 1.42% in the past week. Atilla Widnell is the managing director of Navigate Commodities. She said that as a result, Dalian's iron ores prices have fallen in line with the changes in "Singapore's iron ore" prices last week. The rise in iron ore prices on Monday is a result of Chinese liquidity returning to market. The market has responded positively to the ramping up of blast furnaces in China, he said. According to Mysteel data, the arrivals of iron ore at 47 Chinese ports have decreased by?1.7 millions tons from week to week, which has supported?prices. A note from the Shanghai Metals Market stated that market?transactions will gradually increase and spot prices should remain stable as downstream steel demand is expected recover. Coking coal and coke, the other steelmaking ingredients, fell by?1.65% each and 2.3% respectively. The steel benchmarks at the Shanghai Futures Exchange were mixed. Rebar and hot-rolled coil both lost 0.88%. While stainless steel rose 0.09%, wire rod grew 1.84%. $1 = 6.8945 Yuan (Reporting and editing by Sumana Nandy, Janane Venkatraman).
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Japan's Nikkei Stock Index rises on AI-related stocks; Companies on China Export Control List Mixed
Japan's Nikkei average rose on Tuesday, as trading resumed following a long holiday weekend.?Artificial intelligence?related stocks rallied amid speculations of more investment in this hot sector. The Nikkei closed at 57 321.09, up 0.9%, while the Topix gained 0.2%. Last week, it was reported that Nvidia is close to finalising its $30 billion investment into OpenAI as the chipmaker looks to acquire a stake in?one of its largest customers. Nvidia is a bellwether for the AI industry and will report its results on Wednesday. Naoki Fujiwara, senior fund manager of Shinkin Asset Management, said that investors have reacted, even though it's still speculation. "Expectations?for growth in AI Infrastructure grew." Furukawa Electric, a manufacturer of fibre-optic cables, jumped 15%. China added Japanese companies to its list of export controls to curb what it called Japan's "remilitarisation," causing a mixed reaction in the shares of those firms. Mitsubishi Materials rose by 3.8% while Subaru fell by?3.5%. News of the attack sent Japanese defence stocks soaring. Mitsubishi Heavy Industries fell 3.1%, and IHI dropped 5.7%. (Reporting and editing by Subhranshu sahu, Mrigank Dhaniwala).
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MORNING BID EUROPE - Trump fumes at the world after his tariffs fall short
Is this the Art of the Deal, Gregor Stuart Hunter? U.S. president Donald Trump warned that trade partners should not "play games" and back out of recently agreed trade agreements after the Supreme Court ruled against his 'emergency tariffs. Some foreign governments want to check if they still have the same terms that were originally negotiated. Trump will "come out smokin'" in his State of the Union Address on Tuesday, after the tariff setback. He may even take aim at the Supreme Court Justices who are seated there. However, governments in Asia still have concerns. Japan wants to know if the treatment of 'the nation under a new U.S. Tariff regime will be as favorable as an agreement that was reached between both sides last year. Taiwan wants assurances that the U.S. will not alter the favorable terms they have already agreed. China, not wanting to be outdone in the trade wars in Washington, banned the export of dual-use goods to 20 Japanese entities it claims have military ties, to curb Japan's "remilitarisation". The markets in Japan and China have largely ignored the dispute. They gained a boost as they reopened following local holidays, and caught up with the Friday trade news. Both the Nikkei 225 index and CSI 300 index gained more than 1%. Other markets in Asia have stabilised following the Wall Street selloff that was attributed by some analysts to Citrini Research's "doomsday analysis" released earlier in the week. Citrini Research presented a?"vision of the _damage AI could cause on the global economic system in the coming years. U.S. S&P 500 e-mini futures recovered, ?rising 0.3%. The AI supply chain has also pushed benchmarks for?Taiwan, South Korea and MSCI's Asia-Pacific broadest index outside Japan to new highs. Early European futures showed a 0.3% increase in the last trade. German DAX futures rose by 0.2% and FTSE Futures fell 0.1%. Key developments on Tuesday that could impact the markets Earnings of the company Home Depot, Workday, Telefonica, Endesa Economic Events France: business confidence for February Debt auctions: UK 7-year government debt
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Asia stocks attempt to stabilize after Wall St sale dims mood
After a wobbly start on Tuesday, Asian stocks stabilized after a new sell-off linked to AI on Wall Street. Investors were also affected by increased anxiety about President Donald Trump's tariff policy and geopolitical conflicts. MSCI's broadest Asia-Pacific share index outside Japan is on course for new highs following a seven-day rally. The index gained?0.3% as benchmarks in Taiwan, South Korea and Japan both reached their highest levels on record. Nikkei 225 in Tokyo rose 0.9%, while China's CSI300 gained 1.2%. Both markets were playing catch-up following a holiday. S&P 500 futures e-mini were up by 0.3%. The Nasdaq Composite fell 1.1% overnight, due to fears about the effects of AI in software and other industries. Citrini Research's bearish analysis of the possible risks for the global economy has further weakened investor sentiment. Tony Sycamore said that the report "got a lot more airplay" than it deserved. He is a market analyst for IG in Sydney. He added that the report "aligns with quite a number of fears" which are already out there. "Asian equity markets are doing well, because they still have exposure to AI without valuation concerns." Rupal Agarwal is Asia quant strategist at Bernstein Singapore. She said that shares of companies which were at the heart of the recent rally could be caught by stretched valuations. She said that investors have been chasing the stocks which have performed best in Asia and America over the past 12 months to an extent never seen before. The risk of a reversal is high, with valuations at a record-high and earnings revisions showing signs that they are peaking. Trump warned on Monday that countries should not back away from the trade agreements they have recently made with the U.S., after the Supreme Court ruled against his emergency tariffs. He said he would impose much higher duties if he had to under new trade laws. The new tariffs were based on Section 122 of Trade Act of 1974. This has caused further confusion among markets that are trying to understand the protectionist policies of the United States. Ryosei Acazawa, the Japanese trade minister, has asked that Japan's treatment in a new U.S. Tariff regime is as favorable as the agreement between the two parties last year. The government of Taiwan said that it would ask the U.S. for assurances that the favorable terms already agreed upon will not be changed. The CBOE Volatility Index (also known as Wall Street’s “fear gauge”) rose by 1.9 percentage points, to 21.01. Returning from holidays, Japan and China added liquidity to regional markets. This was even as two of Asia's biggest economies fought over trade. China's Commerce Ministry announced on Tuesday that it had banned the export of dual use items to 20 Japanese companies it claims have military ties. The measure was intended to curb Tokyo's nuclear and "remilitarisation". The U.S. Dollar was 0.4% higher against the yen at 155.21, according to the Nikkei, which reported that U.S. authorities had taken the initiative by conducting "rate checks" in January?to support the Japanese currency and were prepared to carry out joint interventions at Tokyo's request. The Chinese Yuan was stable at 6.8912 against the dollar, in offshore trade. Beijing had set its daily fix for its currency to the highest in almost three year and held its benchmark lending rate for the ninth consecutive month. FedWatch, a tool of the CME Group, shows that Fed funds futures indicate a 95.5% implied probability that rates will remain?on hold' at the next 2-day meeting, which is scheduled for March 18. This is little different from the day before, according to CME Group. Investors pondered the implications of the Supreme Court decision regarding U.S. Tax receipts. The yield on the 10-year Treasury Bond in the United States was up 1.9 basis point at 4.0443%. Brent crude rose 0.5% to $71.83 a barrel on the?commodities market as tensions between Iran and the U.S. continued to simmer. A senior State Department official announced on Monday that the Department is removing non-essential personnel from the U.S. Embassy in Lebanon and their family members who are eligible, due to growing concerns over the possibility of a war. Silver fell 1.2% to $87.19, and gold dropped 1.1% to $5,173.29 despite the uncertainty. Bitcoin fell 1.6%, to $63,509.61. Ether was down 1.3%, at $1,838.96. (Reporting and editing by Gregor Stuart Hunter, Shri Navaratnam, and Kim Coghill).
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Australia watches China iron ore discussions for possible budget impact
Madeleine King, Australia's Resources Minister, said that the country is watching closely the talks between China's state-backed iron ore buyer and the?majors' because of the impact a lowered?ore price could have on the federal government budget. The federal government relies heavily on the taxes paid by mining companies. Iron ore, Australia's top-earning commodity export, is worth A$500 million ($350 million) in 2025-26. Treasury estimates indicate that a $10 change in iron ore prices would affect tax receipts in 2025-26 by A$500,000,000 ($350,000,000). The state-owned iron ore buyer China Minerals 'Resources Group' (CMRG) is trying to get better terms from Chinese steel mills on the $132 billion seaborne market by using increasingly aggressive tactics against the iron ore mining giants. Since September, BHP has banned its mills from buying certain brands of iron ore while negotiations are ongoing for this year's supplies. King said that iron ore was the foundation of Australia's economy. The exports from the Pilbara were also very important for the Australian community and, of course, the federal budget. Australia is home to three of the four largest iron ore mining companies in the world, Rio Tinto BHP and Fortescue. Brazil's Vale is the fourth. King said that iron ore was a commodity on which the government had been relying for a very long time. He added that negotiations were being closely monitored by the government. King stated that iron ore price reductions are usually reported as reducing the profit of a miner like Rio Tinto, but it is actually the bottom line budget that's affected. The government always monitors these things. BHP CEO Mike Henry stated overnight that in the past, even during difficult negotiations, BHP was able to come to an agreement with CMRG regarding annual supply terms. He said, "It's fair to say that (it's a) little bit more wide than in the past," at a BMO conference in Miami. "I'm confident we'll navigate all the way to the solution in this case." It's taking a bit longer, and playing more publicly than in previous years.
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Asia stocks attempt to stabilize after Wall St sale dims mood
After a shaky start, Asian stocks stabilized after Tuesday's wobbly start. A fresh AI-related selloff on Wall Street shook investors. Investors were also affected by increased?anxiety about U.S. president Donald Trump's policy on tariffs and heightened geopolitical tensions. MSCI's broadest Asia-Pacific share index outside Japan is on track for a seven-day rally. It advanced 0.4%, as benchmarks in Taiwan & South Korea reached their highest levels ever. Nikkei 225 in Tokyo rose by 0.8%, while China's CSI300 gained 1.3%. The markets were playing catch-up following a holiday. S&P 500 futures rose 0.3%. The Nasdaq Composite fell 1.1% overnight, as investors feared the effects of AI in software and other industries. Citrini Research's bearish analysis of the possible risks for the global economy has further weakened investor sentiment. Tony Sycamore said that the report was "getting a great deal of airplay". He is a market analyst with IG in Sydney. He added that the report "aligns with quite a number of fears" which are already out there. The Asia equity markets are still exposed to AI without any valuation concerns. Rupal Agarwal is Asia Quant Strategist at Bernstein Singapore. She said that shares of companies at the 'heart of recent rally' risk being caught by stretched valuations. She said that "investors have chased the stocks which have performed best in Asia and America over the past 12 months to an extent never seen before the 2000 or 2020 cycles." The risk of a reversal is high for these stocks, with valuations at record highs and earnings revisions showing "signs of peaking." Trump warned on Monday that countries should not back away from recent trade agreements with the U.S., after the Supreme Court struck off his emergency tariffs. He said he would hit these countries with higher duties under other trade laws. The new tariffs were based on Section 122 of Trade Act of 1974. This has caused further confusion among markets that are trying to understand the protectionist policies of the United States. Ryosei Acazawa, the Japanese trade minister, has asked that Japan's treatment in a new U.S. Tariff regime is as favorable as the agreement between the two parties last year. The government of Taiwan has said that it will Seek assurances The U.S. must ensure that the terms of the agreement are not changed. The CBOE Volatility Index (also known as Wall Street’s “fear gauge”) rose by 1.9 percentage points, to 21.01. The liquidity of regional markets increased on Tuesday as Japan and China returned from their holidays. The U.S. Dollar was 0.2% higher against the yen at 154.985, after the Nikkei reported that U.S. authorities had taken the initiative to conduct the January "rate check" in order to support the Japanese currency, and were prepared?to carry out joint interventions at Tokyo's requests. In offshore trade, the?Chinese Yuan rose 0.1% to 6.8938 yuan per dollar. Beijing had set its daily fix for its currency as the highest in nearly three years. It also held its benchmark lending rate for the ninth consecutive month. FedWatch, a tool of the CME Group, shows that Fed funds futures indicate a 95.5% implied probability that rates will remain on hold during the next two-day meeting, which is scheduled for March 18. This is little different from the day before. Investors pondered on the impact of the Supreme Court's ruling on U.S. Tax Receipts. The yield on the 10-year Treasury Bond in the United States was up 1.9 basis point at 4.0443%. Brent crude rose 0.8% to $72.06 on the commodities market as tensions between the U.S.A. and Iran continued to simmer. A senior State Department official announced on Monday that the Department is pulling non-essential personnel from the U.S. Embassy in Lebanon and their family members who are eligible. This comes amid increasing concerns over the possibility of a war. Silver fell 1.1% to $87.28, while gold, a safe haven, dropped 0.9% to $5,182.23. Bitcoin fell 1.3% to $63,736.65, and ether dropped 1.6% to $1.834.30. (Reporting and editing by Shri Navaratnam.
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Dalian iron ore prices fall as China resumes trading
The Dalian iron-ore futures fell on Tuesday in response to the drop in the 'Singapore iron-ore prices during the Lunar New Year holiday. However, a recovery in production and a fall in shipments are expected to support the prices. As of 0319 GMT, the most traded May iron ore contract at China's Dalian Commodity Exchange was trading 1.19% lower. It was 745 yuan (US$108.03) per metric ton. The benchmark March ore price on the Singapore Exchange rose by 0.89% to $96.7 per ton. Trading on the DCE, SHFE and Singapore Exchange ceased between February 16 and February 23 due to the Lunar New Year holiday. However, the Singapore Exchange continued trading, with the benchmark Singapore Iron Ore contract falling 1.42% in the last week. Atilla Widnell is the managing director of Navigate Commodities. She said that as a result of this, Dalian's iron ores prices have fallen in line with the changes in "Singapore's iron ore" prices last week. The rise in iron ore prices on Monday is a result of Chinese liquidity returning to market. The market has responded positively to the ramping up of blast furnaces in China, he said. According to Mysteel data, the arrivals of iron ore at 47 Chinese ports have decreased by?1.7 millions tons per week, thereby?supporting?prices. A note from the Shanghai Metals Market stated that market transactions will gradually increase and spot prices should remain stable as downstream steel demand is expected recover. Coking coal and?coke, which are used to make steel, also fell on the DCE. They were down by 1.52% and 2.18 percent, respectively. The benchmarks for steel on the Shanghai Futures Exchange were mixed. Rebar and hot-rolled coil both lost 0.75%. Wire rod rose 0.51%, while stainless steel gained 0.51%. ($1 = 6.8961 Yuan) (Reporting and editing by Janane Venkatraman; Ruth Chai)
McGeever: Watch out for the oil's disinflationary drag disappearing
Since mid-2024, oil prices have consistently been a disinflationary factor for the U.S. economy and global economy. This may soon change.
Brent and West Texas intermediate crude oil futures are at their highest level in almost seven months, fueled by signs of an economic?upturn? at the beginning of the year as well as simmering tensions between the U.S. and Iran that could lead to a military conflict.
WTI rose to?above $67 per barrel on Friday, and Brent reached $72, bringing their gains for the year so far?to?around 15%.
More importantly, from an inflation-calculation perspective, oil's rise means the year-on-year increase is dwindling rapidly, to the point that Brent is now only 2% cheaper than it was a year ago. Early January, the price was almost 30% lower than it had been a year ago.
The so-called base effects of oil are on the verge of switching from deflationary to inflationary. Since August 2024, oil's base effects are mostly negative and have a downward influence on inflation rates.
It may become harder for the Federal Reserve, if this changes, to justify interest rates cuts. The Fed targets an annual "core" inflation rate. However, higher oil prices raise the cost of goods and services. Some of this is paid by consumers.
Is inflation going the wrong way?
Crude prices are still important, even though oil's influence on U.S. inflation and economic activity has waned over the past decade as manufacturing and industry have declined.
Transport, including motor fuel costs, accounts for around 16% in the total monthly basket of goods. This is higher than any category, except shelter.
A sustained rise in oil prices will still have a significant impact on inflation. In 2023, a Fed paper found that the second round effects of a 10% permanent increase in oil prices would lift the headline CPI in non-U.S. developed economies by nearly 0.4%.
Gregory Daco is the chief economist of?EY Parthenon. He estimates that an increase in oil prices by $10 can boost annual inflation rates in the United States by as much as 0.2 percentage points.
This doesn't seem like much. Oil is up $10 already this year and the?U.S. The Fed's preferred measure of inflation has the rate at around 3% and is creeping up. Could an unexpected oil-driven increase in inflation cause the Fed to adjust its interest rate?
Raphael Bostic, the Atlanta Fed president who is leaving his post on Friday, told an event organized by the Birmingham Business Journal that if the Fed's target of 2% inflation was threatened to be "runaway", then rate increases might be necessary to maintain the Fed's credibility.
If it starts to move in the opposite direction again, that would be super concerning and you would have to raise your prices. If it moves in the opposite way again, that would be very concerning and you would need to consider raising the rates," said Bostic who is retiring at the end this month.
Short-term Oil Outlook Bullish
We are not yet in a state of full-blown oil crisis like the ones that occurred in the 1970s and few expect to see such a situation.
Oil is facing a fundamental issue of oversupply, which should limit any price increases. Analysts at JPMorgan estimate production cuts of up to 2 million barrels a day would be required just to avoid "excessive oversupply" next year. It is possible that a U.S. - Iran conflict could cause some supply disruptions, but this would be tolerated or offset by other producers.
Traders are still jittery.
Since early January, when Washington began to 'intensify its anti-Tehran rhetoric, the price of a barrel of crude has risen by around $10. A full-scale conflict with Iran would increase the premium, even though it is a low probability scenario. This is because roughly 20% of global oil production passes through the Strait of Hormuz - a narrow shipping route between Iran and Oman.
Even if the premium was to rise, that does not automatically mean inflation will rise. There are other price pressures. Not least, there is potential relief after Friday's U.S. supreme court ruling against President Donald Trump’s tariffs.
Inflation signals are not as clear from the rest the global commodities complex. While some commodities like wheat and corn are cheaper today than a year earlier, others like copper and metals are much more expensive.
Oil's potential to become an inflationary booster, rather than a deflationary drag will be a reason for policymakers to pay close attention to the Gulf news.
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(source: Reuters)