Wednesday, April 20, 2011

Steel Firms Gerdau (GGB) (SCHN) (AKS) (CRS) Jump on Steel Dynamics' Strength

Even though the results of Steel Dynamics (NASDAQ:STLD) gave steel stocks like Carpenter Technology (NYSE:CRS), Gerdau S.A. (NYSE:GGB), Schnitzer Steel Industries (NASDAQ:SCHN) and AK Steel Holding Corporation (NYSE:AKS) a big boost Tuesday, overall, the steel industry looks weak over the next five years, as it is expected to grow at a pace of 5 percent or less annually, putting downward pressure on steel producers like. And that's the more optimistic outlook by analysts. Most don't think growth will be at that rate.

Most 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 dropping, because it's not. But rising demand doesn't guarantee rising profits, as the industry is finding out. Weak economies around the world could cut into demand if steel prices and products rise to prohibitive levels.

There's no way to spin this in a positive manner. 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.

As for Steel Dynamics, it admits bad weather in February could have been the reason for the jump in March shipments. Even if steel companies in general have a good quarter to report, it's very doubtful it has changed the outlook over the next several years. It could be a chance to make some quick money though.

Steel Dynamics (NASDAQ:STLD) closed at $18.46, gaining $1.00, or 5.73 percent. AK Steel Holding Corporation closed at $16.08, rising $0.69, or 4.48 percent. Schnitzer Steel Industries closed at $59.61, jumping $0.99, or 1.69 percent. Gerdau S.A. ended the session at $11.82, increasing $0.06, or 0.51 percent. Carpenter Technology closed at $43.20, gaining $1.72, or 4.15 percent.

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