BNIS Short

BNIS Short Notes

Notes
Commodities Sector (Metals)

Analyst: EQUITY RESEARCH

Firman Hidayat
firman.hidayat@bnisekuritas.co.id July 30, 2019

Contending with Global Slowdown

NEUTRAL
What’s New?
Gold price movement
 A glimmer of hope for metals complex in 2H19 on the expected global
central banks’ concerted stimuli

Key Highlights
 Protracted trade tensions have hit metals complex hard
 Gold is a rare bright spot in the metals complex
 Nickel price outlook—bottoming out
 Silver’s demand is susceptible to slowing global growth

Trade tensions hit global metals industry hard

Commodity sector, metals industry in particular, has borne the brunt of trading
tensions, with non-ferrous metal complex hit the hardest. The protracted US- Source: Bloomberg, BNIS Research
China trade tension has resulted in considerable slowdown in global economic
growth, notably evidenced in China’s multi-decade growth lows in 2Q19. In turn,
this has hurt demand for metals and their prices. For 2019E, Moody’s estimated Nickel price movement
global Gross Domestic Product (GDP) growth at 2.9%, EU area at 1.8%, and China
at 6.0% making this year more challenging in terms of Purchasing Manager Index
(PMI). If the PMI numbers in the major economies such as U.S, China, and EU in
2H19 bottom out and are sustained at above 50, it would bode well for the
metals industry. Conversely, if their PMI numbers deteriorate in the remaining of
this year, it could exacerbate the current predicament.

Gold is a rare bright spot in the metals complex

In our view, Gold's role as an alternative currency asset may rise in the mid-to-
long term. Gold's complexity relates to its historical use as a currency. Central
banks have driven up global demand with 1Q19 net purchases hitting six year
high. Russian and Chinese central banks have been aggressively building up their Source: Bloomberg, BNIS Research
respective gold reserves in the past ten years. We believe amid the uncertain
economic global growth due to the protracted trade tension and global central
banks’ concerted stimuli would prop up demand for gold in 2H19 onward. Silver price movement
Against this backdrop, in our model, we use assumption for average gold price of
USD1,375/oz for 2019E.

Nickel price outlook—bottoming out

The demand growth continued lagging behind the supply growth in the steel
industry. That said, assuming conservatively of annual global stainless steel
growth of 2.5% (vs. 5.9% CAGR in 2013-18), the estimated total portion of nickel
demand from the steel industry would likely soar to 77.3% in 5 years (vs. the
current portion of 70%). In 4M19 China's nickel ore import rose 30.7% y-y to
nearing 4.8 million tons, as shipments from the Philippines more than doubled to
1.4 million tons and supplies from Indonesia increased 15.2% y-y to 3.4 million
tons. Meanwhile, nickel prices touched their highest in the last 4 months on the Source: Bloomberg, BNIS Research
back of strong Chinese demand as increasing production of “300 series” stainless
steel which has a high nickel content and most commonly used in industrial
commands the largest market share in the stainless steel industry. We are quite
sanguine that nickel price would exceed USD14,500/ton in this year as nickel
supply is expected to decline.

Silver demand is susceptible to slowing global growth

The 2H19 outlook for silver price would continue be driven largely by global
growth outlook owing to silver’s largest demand stems from industrial
fabrication. In turn, silver demand is also more susceptible to slowing global
growth. In industrial complex, silver is largely used for production of electrical
and electronics. Consensus estimate expects silver price to average at USD15.6/
tr. oz in 2019E, compared with USD17.1/tr. oz in 2018.

1
 BNIS Short Notes

APPENDIX
Exhibit 1. PMI of U.S, China, and EU movement Exhibit 2. Global central banks’ demand for gold

Source: Bloomberg, BNIS Research Source: World Gold Council, BNIS Research

Exhibit 3. Global nickel inventory vs. nickel price movement Exhibit 4. Global silver inventory vs. silver price movement

Source: Bloomberg, BNIS Research Source: Bloomberg, BNIS Research

Exhibit 5. Comparison matrix of select listed metal mining companies

Market cap ROE (%) P/E (x) EV/EBITDA (x)

Company Ticker
(IDR bn) 2019E 2020E 2019E 2020E 2019E 2020E

Vale Indonesia INCO IJ 31,796 2.7 4.7 36.6 19.9 10.2 7.5
Aneka Tambang (Persero) ANTM IJ 22,349 5.8 7.1 16.3 12.6 9.6 8.1

Merdeka Copper Gold MDKA IJ 19,573 17.7 15.1 16.8 16.0 8.9 8.1

Timah (Persero) TINS IJ 8,193 13.7 13.1 7.2 7.6 6.8 6.7

J Resources Asia Pasifik PSAB IJ 6,139 6.2 10.2 15.9 8.6 4.3 3.8
Sources: Bloomberg, BNIS Research

Analyst:
Firman Hidayat
firman.hidayat@bnisekuritas.co.id

2
 BNIS Short Notes

MAIN OFFICE - JAKARTA

PT BNI SEKURITAS
Sudirman Plaza, Indofood Tower 16th Floor, Jl. Jend. Sudirman Kav. 76-78
Jakarta 12910, Indonesia
Phone: (62-21) 25543946 (Hunting)
Fax: (62-21) 57935831
e-mail: bnisec@bnisekuritas.co.id (General)

JAKARTA - Mangga Dua MALANG

Pertokoan Mangga Dua Blok E4 No. 7 Jl. Buring No. 58, Malang
Jl. Mangga Dua Raya, Jakarta Utara Phone: (62-341) 321214,321213,321430
Phone: (62-21) 6123804-5,62203890 Fax: (62-341) 356876
Fax: (62-21) 6123806 e-mail: malang@bnisekuritas.co.id
e-mail: manggadua@bnisekuritas.co.id
DENPASAR
JAKARTA - Puri Indah Komplek Pertokoan Diponegoro Megah Blok A5-6 Lantai 2
Gedung Bank BNI Ruko Grand Puri Niaga Jl. Diponegoro No. 100, Denpasar - Bali
Puri Kencana Blok K 6 no.2J 2K Phone: (62-361) 264376, 2753389
Puri Kembangan, Jakarta Barat Fax: (62-361) 229170
Phone: (62-21) 58357464 e-mail: denpasar@bnisekuritas.co.id
Fax: (62-21) 58357465
e-mail: bnispuri@bnisekuritas.co.id MEDAN
Jl. Pemuda No. 12, Medan - 20151
JAKARTA - Central Park Phone: (62-61) 4579616
Central Park, APL Tower Podomoro City Fax: (62-61) 4579656
Jl. Letjen S. Parman Kav 28, Tanjung Duren Selatan, Petamburan e-mail: medan@bnisekuritas.co.id
Phone: (62-21) 29034215
Fax: (62-21) 29034216 PALEMBANG
email: centralpark@bnisekuritas.co.id Jl. Jend. Sudirman 132, Palembang - 30126
Phone: (62-711) 361969
JAKARTA – Wisma Bumiputera Fax: (62-711) 319663
Wisma Bumiputera Lt. 18 e-mail: plb@bnisekuritas.co.id
Jl. Jend. Sudirman Kav. 75 Jakarta 12910
Phone: (62-21) 2523349 PEKANBARU
Fax: (62-21) 2523350 Jl. Riau, No. 124, Bank BNI Lt. 2, Pekanbaru
e-mail: wisma46@bnisekuritas.co.id Phone: (62-761) 46757, 839698
Fax: (62-761) 856279
BANDUNG e-mail: pekanbaru@bnisekuritas.co.id
Jl. Perintis Kemerdekaan 3
Bandung - 40117 MANADO
Phone: (62-22) 4213375 BNI KLN Megamas, Lt. 3, Kawasan Mega Mas Blok I C1
Fax: (62-22) 4220604 Jl. Piere Tendean, No. 20, Manado
e-mail: bnisbpk@bnisekuritas.co.id Phone: (62-431) 847256
Fax: (62-24) 847256
YOGYAKARTA e-mail: manado@bnisekuritas.co.id
Jl. Laksda Adisucipto 137, Yogyakarta - 55282
Phone: (62-274) 581001-584032 ACEH
Fax: (62-274) 584023 Kantor Cabang BNI Banda Aceh Lt.2
e-mail: jogja@bnisekuritas.co.id Jl. KH. Ahmad Dahlan No. 111, Banda Aceh
Phone: (62-651) 31109
SOLO Fax: (62-651) 31107
Jl. Honggo Wongso No. 24, Surakarta
Phone: (62-271) 729667, 730525 BANJARMASIN
Fax: (62-271) 729668 Gd. Bank BNI Antasari Lt. 2
e-mail: solo@bnisekuritas.co.id Jl. Pangeran Antasari No. 44 RT 008, Banjarmasin
Phone: (62-511) 3253735
SURABAYA Fax: (62-651) 3253754
Jl. Gubernur Suryo No. 36, Surabaya e-mail: banjarmasin@bnisekuritas.co.id
Phone: (62-31) 5320912
Fax: (62-31) 5318425
e-mail: surabaya@bnisekuritas.co.id

DISCLAIMER
This document is not intended to be an offer, or a satisfaction of an offer, to buy or sell relevant securities (i.e. securities mentioned herein or of the same issuer and
options, warrants or rights to or interest in any such securities). The information and opinions contained in this document have been compiled from or arrived at in
good faith from sources believed to be reliable. No representation or warranty, expressed or implied, is made by BNI SEKURITAS or any other member of the BNI
Group, including any other member of the BNI Group from whom this document may be received, as to the accuracy or completenes s of the information contained
herein. All opinions and estimates in this report constitute our judgment as of this date and are subject to change without notice.

Dokumen ini tidak diperuntukan sebagai suatu penawaran, atau permohonan dari suatu penawaran, permintaan untuk membeli atau menjual efek dan segala hal yang
berhubungan dengan efek (seperti efek yang disebutkan disini, atau dari emiten yang sama, dari waran atau hak memesan efek atau kepentingan lain dari efek
tersebut). Seluruh informasi dan opini yang terdapat dalam dokumen ini dengan cara baik telah dihimpun dari atau berasal dari sumber-sumber yang dapat dipercaya
dan diandalkan. Tidak ada pengatasnamaan atau jaminan, baik secara langsung maupun tidak langsung dari BNI SEKURITAS atau pun pihak-pihak lain dari Grup BNI,
termasuk pihak-pihak lain dari Grup BNI dari mana dokumen ini dapat diperoleh, terhadap keakuratan atau kelengkapan dari informasi yang terdapat dalam dokumen
ini. Seluruh pendapat dan perkiraan dalam laporan ini merupakan pertimbangan kami pada tanggal tertera dan dapat berubah sewaktu-waktu tanpa pemberitahuan.