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Speaker 1: word breaking news test for today's afternoon call. Here he
Speaker 1: is Bill Maloney. Good afternoon, Charlie. Manuals averagers are under
Speaker 1: pressure today, with the DAL currently down fifty eight points,
Speaker 1: SP drop eleven and AZACT declines forty five, small cap
Speaker 1: six hundreds lowered by five points, and the US tenniel
Speaker 1: at one point five six percent. Eight out of tennesse
Speaker 1: to B sectors are lower, led by losses in healthcare,
Speaker 1: materials and technology. Games for utilities and telecom doubt. Transports
Speaker 1: are a little change now as a biotechs where hit hard,
Speaker 1: falling three point two percent, utilities gain one and the
Speaker 1: vix is higher by ten percent down Leaders to the
Speaker 1: downside included United Health Group, Merk and Caterpillar, while Nike, Walmart,
Speaker 1: and Chevron led to the upside. New Amount Mining fell
Speaker 1: as much as eight point three percent amid declines in gold,
Speaker 1: while especially farmer names led to the client. In an
Speaker 1: ESP five hunted healthcare index, Malin fell as much as
Speaker 1: five point nine percent after the belts not look for
Speaker 1: earnings from Workday HP and Williams Sonoma live on the
Speaker 1: first Breaking News dascom Bill Maloney, Charlotte, all right, thank
Speaker 1: you very much. We'll be all over those earnings, Bill Maloney.
Speaker 1: And to hear live breaking news over here Bloomberg type
Speaker 1: squawk a sq you a w K on your terminal.
Speaker 1: I'm Charlie Pellett. That's subloom Bred business slash June listening
Speaker 1: to taking stock with Bim Box and Kathleen Hayes on
Speaker 1: Bloomberg Radio. And I'm alex A Baranca here for Kathleen
Speaker 1: Hayes today and we have Glencore on the mind. The
Speaker 1: company posted its lowest profit in its five year history,
Speaker 1: and it's seen as a reflection of the dire state
Speaker 1: of the mining industry. Here to tell us more is
Speaker 1: Phil Gibbs, vice president and equity research analysts focusing on
Speaker 1: the industry at key Bank Capital Markets. Phil, what does
Speaker 1: this say about what's going on right now with raw
Speaker 1: material prices and and in the industry in general. Hey, Alex,
Speaker 1: good to be with you. From a high level, I
Speaker 1: think there's a common set thread from the release to
Speaker 1: the rest of the global medals and mining world, and
Speaker 1: and I think there's a little bit of cautious optimism.
Speaker 1: There was a clear recognition from Glencore that commodity prices
Speaker 1: have come off the bottom and broader second half profit
Speaker 1: performance should improve a bit versus the first half. However,
Speaker 1: no one is jumping for joy given the world remains
Speaker 1: fragile and the long transition in China, which we've just
Speaker 1: gust in previous calls here from an infrastructure led economy
Speaker 1: to a consumer based economy is just starting and that
Speaker 1: should be a long transition. So Glencore appears to continue
Speaker 1: to be managing the business in a very conservative manner,
Speaker 1: focus on reducing their leverage, maintaining their low cost position,
Speaker 1: selling non core assets, and keeping their previously curb capacities
Speaker 1: offline until better days are ahead and seen. I would
Speaker 1: say year to date at the US steel industry, which
Speaker 1: I follow more closely, has shown similar supply side discipline
Speaker 1: to how Glencore has managed their zinc supply, which has
Speaker 1: supported steel prices domestically. But we think that's changing what
Speaker 1: zinc and coal prices? What are they up about? That
Speaker 1: is all driven by what the production cuts, as well
Speaker 1: as attempts by Bastions government to stimulate the Chinese economy.
Speaker 1: It could be um him, I think I think the
Speaker 1: key factor here is probably more on on the supply
Speaker 1: side um. And my my view is more on the
Speaker 1: on the U S steel industry, where where we've become
Speaker 1: a bit more cautious as of late. I mean, after
Speaker 1: that big run for let's say U S steal tell
Speaker 1: us about what's going on in the U S steel market,
Speaker 1: didn't they sort of have a bountiful time because of
Speaker 1: the imposition of import tariffs they did? Um, I think
Speaker 1: we were cautiously optimistic on the industry, I would say
Speaker 1: balanced the cautiously optimistic most of this year. As of
Speaker 1: late Friday, however, we now believe that's supplying demand, particularly
Speaker 1: for the U S sheet producers, where U S steal
Speaker 1: would be one UH that market we see now tipping
Speaker 1: the modest oversupply based on our view of peaking demand
Speaker 1: and bottoming supply. So we think now after the run
Speaker 1: and steel prices which steel prices UH called hot rolled
Speaker 1: steel has been up over six off the bottom, we
Speaker 1: think pricing is now poised to more aggressively correct over
Speaker 1: the course of the balance of the year here, which
Speaker 1: did lead to downgrades on our views of U S Steel,
Speaker 1: A k UH Steel Dynamics, and Olympic. And I think
Speaker 1: this environment could also create modest downside risk to seventeen
Speaker 1: fixed price automotive contracts, which I think many many investors
Speaker 1: at this point hope and believe are are are would improve.
Speaker 1: Is there a catalyst that would tip some of the
Speaker 1: sentiment around this industry back into more optimism versus maybe
Speaker 1: a we are not out of the woods yet uh
Speaker 1: situation that we seem to have right now. Yeah, I think, Alex,
Speaker 1: it's really all based on on the supply and demand balance,
Speaker 1: and that's really what we what we hang our hat on.
Speaker 1: And we really wanted our most recent survey to tell
Speaker 1: us that the man was stabilizing let's say, incremental supply
Speaker 1: wasn't going to be a factor, but that's not really
Speaker 1: what it said. UM. Unfortunately, our our survey came came
Speaker 1: across and and said that, uh, there was more potential
Speaker 1: for sub seasonal growth and key en use markets including
Speaker 1: automotives and including non residential construction, which make up about
Speaker 1: six of US steel demand. And I'd also say that
Speaker 1: US distributor daily sheet volumes are down three and a
Speaker 1: half percent here to date. This comes despite modest restocking
Speaker 1: in the second quarter. And and really what drove us
Speaker 1: to change our view is that our distributor context now
Speaker 1: expect below normalized seasonal demand patterns in both the third
Speaker 1: and fourth quarters, which is what really troubled us. And
Speaker 1: some of that which which was new was that we
Speaker 1: are starting to see some some more some some new
Speaker 1: weakness and non residential construction. And you also have had
Speaker 1: the called the lethargy and the in the mining, rail,
Speaker 1: agg and energy UH sectors already. So I think broader
Speaker 1: caution from US in terms of what we're seeing in
Speaker 1: in the US economic indicators as it comes from our
Speaker 1: U steal channel omnia on the demand side. So you're
Speaker 1: saying maybe just underweight the whole sector for a while.
Speaker 1: We are um, I think we're we're telling people to
Speaker 1: take a little bit of money off the table until
Speaker 1: we get uh some more some more visibility on the
Speaker 1: demand front over the next called forty five to sixty days.
Speaker 1: And I think that there's also some natural uncertainty and
Speaker 1: caution in front of the US election. This is a
Speaker 1: very important election for for folks, and and that could
Speaker 1: also lead to some some more subdued capex over the
Speaker 1: next Like I said, um, thirty to sixty days, we've
Speaker 1: got to leave it there. Phil Gibbs is vice president
Speaker 1: and equity research analysts for Medals and Mining for Key
Speaker 1: Bank Capital Markets. Talking about the steel industry, this is Bloomberg.
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