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AtonRa Partners is an independent equity research and asset management company. Our approach is based on a deep knowledge and understanding of market dynamics and focuses on adding value to clients' portfolios via thoroughly checked proprietary information and data sources. We cherish a... More
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  • What to expect of the Steel Sector? 0 comments
    Oct 23, 2009 10:52 AM
    Most Steel Industry names have lately suffered due to poor figures.
    Although Nucor reported better-than-expected numbers yesterday, it remained cautious on Q4 guidance; and while the Finnish maker "Outokumpu" reported poor numbers, the CEO of Austrian group Voestalpine expressed concerns on poor demand and the possibility of oversupply from Chinese steel makers.

    On the other hand, seeing improved demand going forward, the Korean Posco painted a different picture. The data points from iron ore supplier are equally intriguing; they suggest a demand and price strengthening.

    This leaves us wondering “how can we simultaneously have demand improvement in iron ore and reports of weaker demand from steel makers?”

    We think that in such an environment, integrated steel producers such as Mittal and Tyssen enjoy an inherent strength in the business. Particularly in Mittal’s case, it is poised to capitalize on its heavy car and trucks exposure (25% of total sales), demand for which is stabilizing faster than other segments.

    While most funds are short these integrated steel producing names in anticipation of poor Q4 guidance, we are convinced that these have the potential to surprise on the upside when they report their numbers next week.

    Disclosure: No positions
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