Monday, April 11, 2011

Steel Firms (MT) (CRS) (SCHN) (STLD) Pressured on Low Growth Outlook

The steel industry is uninspiring as over the next five years it is expected to grow at a pace of 5 percent or less annually, putting downward pressure on steel producers like ArcelorMittal (NYSE:MT), Carpenter Technology (NYSE:CRS), Schnitzer Steel Industries (NASDAQ:SCHN) and Steel Dynamics (NASDAQ:STLD). And that's the more optimistic outlook by analysts.

Many 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 declining, because it's not. But rising demand doesn't guarantee rising profits, as the industry is finding out, and 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 positively. The industry will struggle for years, even in the midst of strong demand as they try to figure out the balance between steel demand, rising inputs, and ability for companies and countries to afford price increases from producers.

Steel Dynamics closed Friday at $18.73, falling $0.47, or 2.45 percent. Schnitzer Steel Industries closed at $63.26, down $0.51, or 0.80 percent. Carpenter Technology ended the session at $41.97, dropping $0.47, or 1.11 percent. ArcelorMittal closed at $36.86, falling $0.04, or 0.11 percent.

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