BASIC INDUSTRIES
- Bearish calls on iron ore from commodity analysts continue to flow through, with calls for $80-85 growing. Nonetheless, prices held above $90 again this week. BHP warned that AI growth will worsen the future shortfall for copper.
- Spinoffs continue to be a growing theme in the sector. SKF laid out plans to separate its Automotive and Industrial divisions. Little detail on capital structure was provided, but it said both will have “strong” balance sheets post separation.
- On that theme, BASF’s new CEO laid out a possible IPO of the Agricultural Chemicals division in 2026. That could take leverage meaningfully lower with strengthening the balance sheet mentioned, even if shareholder returns form part of the use of proceeds.
- Anglo American is progressing its coal assets sale. While the valuation has been impaired by the fire at the Grosvenor mine, credit won’t be impacted and continues to be driven by a takeover premium. Speculation continues that BHP will return after the shut-up ends in November.
- Knorr-Bremse is roadshowing for new 5Y and 8Y green bonds, a return to duration for the issuer. While it benefits from diversification, less cyclical aftermarket presence and a supportive rail market, margins are well below peak levels due to the slowdown in Chinese property development.
Spreads performed in-line with the index, with just Aliaxis (+12) wider for the week. Rolls-Royce (-22) put in a strong recovery, Siemens Energy (-14) was strong again and SKF (-14) reacted positively to the spinoff plan.
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