Evening Wrap: ASX 200 edges lower, iron ore slumps to US$102, Pilbara Minerals rallies 5%

Another uneventful session ahead of Anzac day, iron ore miners slump as spot prices approach US$100 a tonne, capital begins to rotate towards Australia-based lithium producers, tech stocks are holding up or breaking out and a few Macquarie notes on resource heavyweights.

Let's dive in.

ASX 200 Session Chart

(Source: Market Index)

Markets

A pretty dull session. I guess half the population is just enjoying an extra long weekend. Weakness from Materials and Energy was offset by everything else. The ASX 200 traded in a relatively tight range today, edging slightly lower.

• Materials led to the downside, led by iron ore miners. More than 40% of steel furnaces in Tangshan have gone into maintenance this week, reducing iron ore demand, according to ANZ Research

• Energy eased in-line with a fall in oil prices. This comes amid signs of soft demand and Russian exports bouncing back above 3 million barrels a day last week

Economy

No major economic announcements.

Latest news

Market Insights

Lithium: Pilbara surges again

It's really interesting to see Pilbara Minerals (ASX: PLS) rally 5.2% while most other lithium names closed in red.

In Monday's Morning Wrap, we noted some considerations for Chile's plans to nationalise its lithium industry including:

• A shift away from Chile (and potentially Argentina) based assets

• A shift towards other jurisdictions such as Canada, US and Australia

• As well as Pilbara Minerals rallying 3.3% last Friday

We continued to see that trend play out today, with most ex-Australia explorers, developers and producers lower. Pilbara Minerals led the local pack, but names like Core Lithium (ASX: CXO) and Mineral Resources (ASX: MIN) also rose around 2%.

Tech stocks: Holding up or breaking out

Is it just me or is the local tech sector also behaving like a safe haven?

A lot of tech names are either moving out or holding up relatively well compared to the rest of the market. Here are some charts of interest:

Technology One daily chart (Source: TradingView)

Wisetech weekly chart (Source: TradingView)

Audinate chart (Source: TradingView)

Data#3 chart (Source: TradingView)

Interesting news and movers

Trading higher

• +7.5% Nanosonics (NAN)

• +5.2% Pilbara Minerals (PLS)

• +2.9% Dicker Data (DDR) – Distribution Contract

Trading lower

• -7.9% InvoCare (IVC) – Takeover withdrawn

• -7.4% South32 (S32) – Q3 production

• -4.5% Lake Resources (LKE) – Down 10% in previous three

• -3.4% Fortescue Metals (FMG) – Q3 production

• Iron ore sector move: Rio (-3.3%), Champion Iron (-2.9%), BHP (-1.9%)

• Gold sector move: Ramelius (-3.3%), Evolution (-2.3%), Northern Star (-1.2%)

Broker updates

Macquarie notes:

BHP (BHP): Outperform with $52.00 target price

• “Solid production in iron-ore and metallurgical coal and a beat in energy coal offset the weaker output at Escondida and Nickel West.”

• “The stock is trading on an FY24 free cash flow yield of 11%, rising to 13% at spot prices.”

Lynas (LYC): Neutral with $6.50 target price

• “LYC’s 3QFY23 result was mixed with in line NdPr production offset by soft total REO output; realised prices were 19% lower due to product mix.”

• “We now assume a ~3-month production suspension in 1HFY24 with sales supported by inventory drawdown.”

• “In our view, uncertainties of Kalgoorlie’s ramp up and operations at LYC’s Malaysia plant present headwinds for the company’s near-term earnings outlook.”

Whitehaven Coal (WHC): Outperform with $8.50 target price

• “3QFY23 saleable coal production and coal sales were soft, with Maules Creek headwinds driving a FY23 guidance downgrade in the quarter.” 

• “Realised thermal coal pricing of US$280/t remains strong and WHC currently boasts an impressive cash position of A$2.7b.”

• “The resumption of the buy-back, improvements in operational run rate at Maules and Narrabri and construction of Vickery are key near-term catalysts.”

Woodside (WDS): Neutral with $33.0 target price 

• “1Q revenues stronger than expected, mainly on better LNG price realizations. 32% spot gas exposure was higher than 20-25% CY23 guide.”

• “Neutral. Expanding exploration portfolio offers upside potential in US GoM as well as appealing plays in West Africa oil & Eastern Mediterranean gas.”

Scans