Basic Materials Roundup: Market Talk

Dow Jones
Oct 05

The latest Market Talks covering Basic Materials. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.

0741 GMT - Glencore is ramping up capital allocation to its marketing division in the wake of the Middle East conflict, Citi's Ephrem Ravi writes. The miner and trader has a 2026 earnings tailwind due to elevated and volatile commodity markets, he says. The company has upgraded its long-term EBIT guidance for the marketing division, which will likely push consensus expectations higher, he adds. The company had $32.2 billion of readily marketable inventories in the unit as of the first half of the year versus $25.4 billion last year, he says. The company could further ramp up capital allocation to the marketing business over the remainder of the year, he says. Shares rise 0.46% to 653.90 pence. (adam.whittaker@wsj.com)

0722 GMT - Air Liquide's earnings per share growth ambitions through 2030 are in line with consensus but its margin target is ahead of views, Jefferies analysts write. The industrial gases company wants to grow net earnings per share by a compound annual growth rate of 10% over the period while targeting a 400 to 600 basis point improvement in its margin. Margin growth consensus expectations are currently sitting around the 360-basis-point mark, they write. "Importantly, management has historically proven conservative at the outset of strategic periods, with guidance subsequently upgraded through the cycle," they add. Shares rise 2.6% to 174.58 euros. (adam.whittaker@wsj.com)

0500 GMT - Tosoh Corp.'s earnings may be hit by weak polyvinyl chloride market conditions, say SMBC Nikko Securities analysts in a report. Increased supply of methylene diphenyl diisocyanate from new plants of other companies is also near-term concern. In late September, BASF said it had secured an industrial site in India and was advancing a feasibility study for a potential MDI production complex there, they note. In June, Covestro unveiled plans for an MDI project in China and a feasibility study for another project in the U.A.E. The brokerage lowers Tosoh Corp.'s target price to 2,500 yen from Y2,600 with an unchanged neutral rating. Shares are 0.8% higher at Y2,624. (ronnie.harui@wsj.com)

0143 GMT - Gold rises in Asian trade. A softer-than-expected U.S. personal consumption expenditures reading released end-September likely tempered Federal Reserve rate-hike bets in October, Societe Generale says in a note. "The markets priced roughly a 40% chance of an October Fed move, offering gold a tentative foothold as it entered October," SocGen says. A higher interest-rate environment typically weighs on the yellow metal. The precious metal's moves appear to be defined by a "tug of war" between structural buyers--central banks and exchange-traded-fund flows--and macro headwinds such as a strong dollar and increased interest rates, SocGen adds. Spot gold rises 0.3% to $4,155.78 a troy ounce. (megan.cheah@wsj.com)

2110 GMT - A key attraction of Lynas Rare Earths's all-share acquisition of Meteoric Resources is the ability to access more heavy rare earths, suggests Jefferies. Meteoric owns the Caldeira rare-earths project in Brazil's Minas Gerais state. Jefferies models first production in FY34. Analyst Mitch Ryan notes a definitive feasibility study for Caldeira pointed to output of dysprosium and terbium of some 127 tons/year. That adds a material second heavy rare earth feed source alongside Lynas's existing Mt Weld project. "Our model reaches 151 tons/annum at run rate, 64% of Mt Weld's modelled 235 tons/annum," Jefferies says. "Diversification and potential exposure to separated heavy rare earth pricing support the strategic case, subject to mine delivery and sufficient downstream capacity." (david.winning@wsj.com; @dwinningWSJ)

2053 GMT - Northern Star Resources's acknowledgement that it received a US$27.2 billion takeover proposal from Gold Fields is likely to encourage shareholders to pressure on board to consider future proposals, says Ord Minnett. Its price target rises by 31% to A$25.85/share. "Our revised valuation suggests the proposal was rejected more for its significant, higher-risk (jurisdictional) equity component than its overall implied value," analyst Paul Kaner says. He reckons a higher cash component, higher-quality scrip, or a more compelling premium could increase the likelihood of Northern Star formally engaging with a potential suitor. Ord Minnett upgrades Northern Star to accumulate, from hold. Northern Star ended last week at A$24.02.

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