Still Expect More Upside in Base Metals: As our global team
points out in today's quarterly commodity update titled "The Pause
that Refreshes", we believe the risk/reward opportunity in the
metals & mining sector continues to favor further upside in the
base metals and PGMs over the course of 2012.
Commodity Forecast Revisions: Changes to our global metals
forecasts are relatively small this quarter, with no changes to our
copper, palladium, and gold outlook and only minor changes to our
aluminum forecast. We are raising our 2012 platinum forecast by ~7%
(2013 basically unchanged).
We are lowering our 2012 met coal forecast by ~3% (2013
unchanged) and our seaborne thermal coal price by ~10% in both 2012
and 2013. Domestically, we are lowering our U.S. thermal coal price
by an average of 11% for 2013.
Commodity Views -
Copper: Rising Chinese demand and supply-side struggles should
continue to drive prices higher.
Palladium: Improving global auto production (particularly in the
US) and supply side constraints to push prices higher.
Aluminum: While production cuts are smaller than expected, cost
pressures continue to support prices.
Coal: Our outlook for global met coal prices remains positive,
while US domestic thermal coal prices will likely under pressure
for the foreseeable future due to low nat gas prices, high
inventories and regulatory pressures.
Summary of Earnings Revisions -
Century Aluminum (CENX, $8.71, OUTPERFORM, TP $12.00) - We are
lowering our 2012 estimate from $0.57 to $0.39, vs. Consensus of
$0.11. Our 2013 estimate remains unchanged.
Noranda Aluminum Holding Corp. (NOR, $10.35, OUTPERFORM, TP
$15.00) - We are lowering our 2012 estimate from $1.06 to $0.95,
vs. Consensus of $0.80. Our 2013 estimate remains unchanged.
Stillwater Mining (SWC, $12.06, OUTPERFORM, TP $16.00) - We are
raising our 2012 estimate from $0.80 to $0.89, vs. Consensus of
$0.73. Our 2013 estimate remains unchanged.
Suncoke Energy (SXC, $14.57, OUTPERFORM, TP $17.00) - We are
lowering our 2013 estimate from $1.67 to $1.65, vs. Consensus of
$1.47. Our 2012 estimate remains unchanged.
Top Picks: Freeport-McMoRan Copper & Gold Inc (
), Peabody Energy Corporation (
), Reliance Steel (
), Nucor Corporation (
), AK Steel Holding Corporation (
), Stillwater Mining (SWC).