Friday, April 29, 2011

Haynes (HAYN) (SYNL) (X) (SID) (CLF) Pressured on Low Growth Steel Outlook

The steel industry, even with some strong recent quarters, looks weak, as over the next five years it is expected to grow at a pace of about 5 percent or less annually, putting downward pressure on steel companies like Haynes International Inc. (Nasdaq:HAYN), Synalloy Corp. (Nasdaq:SYNL), US Steel (NYSE:X), Companhia Siderurgica Nacional (NYSE:SID) and Cliffs Natural Resources Inc. (NYSE:CLF); although they traded a little stronger Thursday.

A majority of steel companies are being forced to raise prices on their products in order to protect margins and earnings as the price of inputs and commodities rise.

That's not to say steel demand is falling, because it's not. But rising demand doesn't guarantee rising profits, as the industry is experiencing. A number of weak economies around the world could cut also into demand if steel prices and products rise to prohibitive levels.

There's no way to spin the outlook for the steel industry positively. The industry will struggle for years even in the midst of strong demand, as they attempt to work out the balance between steel demand, rising inputs, and ability for companies and countries to afford price increases from producers.

It also looks like the U.S. economy is starting to sputter again, and that's not good news for the steel industry either.


Anonymous said...

This tone gets old after about 3 repeat articles. Please tell us how Japan will get rebuilt, China will industrialize, Brazil will Industrialize, America will rebuild outdated infrustructure after years of neglect, etc. etc. etc. without steel. Just another bear trying to short the wrong market IMO.

Anonymous said...

...and the big guns have been figuring out how to profit for almost a century, so, uhhhhhhhhhhh, pretty sure they're gonna figure this one out. Demand skyrocketing sure makes it magnitudes easier too. I LOL every spring when everyone freaks out about rising fuel prices "that are gonna destroy the economy" it never happens EVERY YEAR. Deal with it. If you don't like the prices, buy oil stocks to get your money back.