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Commodity Trends and Egypt Equity Correlations 3Q19 - Daily News Egypt

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Commodity Trends and Egypt Equity Correlations 3Q19

Mixed bag for consumer stocks but weak for oil, fertilisers, and chemical producers


Commodity prices witnessed changes during the third quarter of this year, which will companies dependent on these specific commodities for production.

Corn and wheat prices were up by another 3-4% in 3Q19, continuing their upward trend, due to resilient demand and concerns over lower acreage.

Naeem Research found that corn prices will negatively impact the National Company for Maize, while wheat will also negatively impact Edita Food Industries.

On the other hand, prices of 10 commodities were weak when looking at their quarter on quarter (QoQ). Crude Oil prices declined by an average of 9% QoQ to $62bn due to rising US inventories.

Naeem said that the paints and chemicals industries will be impacted positively, unlike Alexandria Mineral Oils, and Qalaa Holdings.

Petrochemicals will also continue from their previous QoQ. Petchem prices dropped by an additional 6-10% QoQ due to a slowdown in demand and increased supplies. Similarly, polypropylene (PP) prices were down by another 5% on a QoQ basis. Oriental Weavers will be impacted positively, but Sidi Kerir Petrochemicals have a negative impact.

Sugar prices were down by another 5% in 3Q19 due to improving supplies.

Raw milk powder posted a 5% surge in 2Q19. Prices were corrected by an average of 4% in 3Q19, reflecting higher supplies. Which will impact positively on Juhayna Food Industries, Domty, and Obour Land.

Urea prices dropped by 7% QoQ on expectations of lower demand after the harvest season, which will negatively impact MOPCO, EK Holding, Abu Qir, and Egyptian Chemical Industries.

Phosphate fertilisers posted an 8% drop in 2Q19 and prices declined by another 11% due to global oversupplies. The Egyptian financial and industrial sectors will be negatively impacted.

 Steel posted a marginal recovery in 2Q19, however, prices were again weak declining by 4% over concerns of global growth slowdown. which will impact negatively on Ezz steel and Ezz Dakheila.

 Iron ore marginally reversed in the recent surge, prices cooled by 4% in 3Q19 due to the resumption of normal supplies. However, prices are still 20% higher on a YoY basis.

Copper prices dropped by 5% due to global demand/growth weakness. Naeem predicts that El Sewedy Electric and Egyptian Electrical Cables will be positively impact.

 Aligned with the drop in global LNG prices, Henry Hub natural gas declined by a further 7% in 3Q19, due to market oversupplies.

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