EM LATAM CREDIT: CSN: Moody’s Watch Neg - Negative
(CSNABZ; Ba3*-/BB-/BBneg)
• Moody’s moved from a stable outlook to a negative watch, likely triggered by Q3 earnings that showed an increase in debt and a lack of free cash flow generation. The rating agency cited high debt levels, persistently weak credit metrics and negative free cash flow.
• CSNABZ 32s were last quoted at $80.25, down 2 points since June 30th and 1 point YTD. There were hopes back in August and most of September that the rise in iron ore prices and stabilization in the domestic steel market might lead to improved EBITDA and debt reduction which drove bonds as high as $88. Operational results were better but leverage did not improve sufficiently.
• We noted in our Q3 2025 earnings post a few weeks ago some of these factors and were disappointed that stronger earnings from the mining business did not translate into materially lower leverage as debt still rose and cash fell: https://mni.marketnews.com/4o5q6zM
• Moody’s said they expected reduced leverage over time but absent any asset sales or capex reduction would still be too high for the current rating. They also expressed concerns about liquidity with upcoming refinancing needs as well as the imbalance with where the debt is at the holding company level vs where the cash is at the mining subsidiary.
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LOOK AHEAD: US Week Ahead Headlined By Delayed CPI Report On Friday
- The September US CPI report will be released on Friday, delayed amidst the government shutdown but with the BLS making a special exception on social security payment considerations.
- Bloomberg consensus looks for headline CPI inflation at a rounded 0.4% M/M after 0.38% back in August and for Y/Y inflation to firm two tenths to 3.1% for what would be its highest since May 2024.
- Core inflation is seen at a rounded 0.3% M/M after 0.35% in August (exceeding the median unrounded estimate of 0.31%) and 0.32% in July. It’s expected to see core CPI inflation hold at 3.1% Y/Y having in August increased to its highest since February.
- Core details should see focus on both goods and services angles: underlying goods inflation has clearly firmed in recent months on tariff pressures although the median increase has currently seen a peak back in June, whilst services will be watched for any spillover after some strong recent non-housing readings.
- The report will come within the FOMC blackout period ahead of the Oct 28-29 decision, with a 25bp cut fully priced and likely needing a large surprise to alter this.
- As for broader inflation details, Fed Chair Powell this week confusingly suggested that we will have the September PPI report but the BLS had previously said “No other releases will be rescheduled or produced until the resumption of regular government services”.
US DATA: Latest Jobless Claims Estimates During The Shutdown
As noted earlier, MNI estimates initial jobless claims at a seasonally adjusted 218k in the week to Oct 11 and continuing claims at a seasonally adjusted 1929k in the week to Oct 4.
- To give a better idea of sensitivity around these estimates, which rely on estimates for some missing states, we note the below analyst estimates:
- Goldman Sachs have a central estimate of 217k for initial claims in a range of 211-225k, whilst they see continuing claims at 1917k in a range of 1885-1930k.
- JPMorgan meanwhile also see 217k for initial claims whilst they see continuing claims as having held constant at 1927k.
NATGAS: Venture Global in Talks with Ukraine for more LNG Deliveries, Reuters
Ukraine is seeking more cargoes from Venture’s Plaquemines facility as the embattled nation approaches the winter heating season, according to Reuters sources
- Venture is in talks with Ukraine’s DTEK to procure more LNG cargoes after a year of gas infrastructure attacks by the Russians.
- Venture Global CEO Michael Sabel met with President Volodymyr Zelenskiy on Thursday October 16.
- DTEK signed an agreement in 2024 for an undisclosed amount of LNG from the facility, as well as 2 mtpa from Calcasieu Pass Phase 2 currently under construction.
- Plaquemines currently has spare capacity to deliver more cargoes to Ukraine on the spot market, per Reuters.
- Plaquemines now sends out the second highest LNG volume in the US, with feedgas demand averaging 3.45 bcf/d according to MNI figures.
