The steel major's joint venture in Ivory Coast is set to cut costs at the Corus facility
Tata Steel’s announcement of a 75 per cent stake in a joint venture to develop iron ore facilities with a state-owned company in Ivory Coast is clearly aimed at bringing down the cost of production at its Corus facility.
Corus supplies steel to the higher end of the Western European steel market, but it does not have iron ore captive resources in contrast to its parent in India.
Analysts point out that supplies of iron ore from the JV in Ivory Coast could directly help in bringing down Corus’ cost of production by $50-60 a tonne over the medium term. The Tata Steel stock rose 3.4 per cent to Rs 865 on Wednesday.
Tata Steel’s cost of production in the domestic market is estimated at $280-300 a tonne (excluding freight cost to the end-customer), while that of Corus is estimated at more than $450 a tonne.
The production cost is higher at Corus for two reasons: its products are value-added and reasonably complex, and it does not have access to captive resources.
The JV in Ivory Coast would give Tata Steel access to reserves of over 700 million tonnes of ore and it is expected to invest $1.5 billion (approximately Rs 6,000 crore) over the medium term to develop these facilities.
Supplies from this facility will be critical to Corus at a time when global contract iron ore prices are expected to jump, when long-term contracts come up for renewal next year.
In addition, Corus is expanding its output of saleable steel by nearly 300,000 tonnes in FY08 and a further 350,000 tonnes in FY09, which would require crucial raw material supplies.
Prior to this expansion, Corus’ finished steel capacity was 22.1 million tonnes.
To part-finance its Corus acquisition, Tata Steel is planning to dilute its equity by nearly 43 per cent via its rights issue to raise up to Rs 6,000 crore.
Prior to this development in Ivory Coast, Tata Steel has also been focusing on improving its captive raw material supplies via a JV to develop a hard coking and thermal coal project with Riversdale in Mozambique. At Rs 865, Tata Steel trades at a reasonable 12-13 times estimated FY08 and 9.5 times FY09 earnings.
Source - Business Standard
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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