Monday, April 11, 2011

Steel's (MTL) (CMC) (CPSL) (SID) (GSI) 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 China Precision Steel, Inc. (Nasdaq:CPSL), Commercial Metals Company (NYSE:CMC), Companhia Siderurgica Nacional (NYSE:SID), Mechel OAO (NYSE:MTL) and General Steel Holdings (NYSE:GSI). And that's the more positive outlook from some analysts.

Steel companies listed represent a good cross section of the industry, as they're based in several countries.

Many steel companies are being forced to increase prices on their products in order to protect margins and earnings, as the price of inputs and commodities continue to surge.

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. 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 them.

Mechel OAO closed Friday at $30.07, falling $0.65, or 2.12
percent. China Precision Steel, Inc. closed at $1.65, down $0.04, or 2.37 percent. Commercial Metals Company ended the session at $16.93, dropping $0.37, or 2.13 percent. Companhia Siderurgica Nacional closed at $16.83, falling $0.06, or 0.36 percent. General Steel Holdings ended trading at $2.29, down $0.04, or 1.72 percent.

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