Ternium S.A. (TX) Faces Cost, Price Volatility

Ternium S.A. (NYSE:TX) is under pressure with the rest of the steel sector as costs mount for raw materials and steel demand slows.

A lot of uncertainty surrounds the steel industry based on the guidance given by the largest steelmaker in the world - ArcelorMittal (NYSE:MT). Even after beating estimates for the latest quarter the stock was punished on a weak outlook, dragging down much of the sector with it.

Softer steel prices in North America and Europe point to major challenges going forward for steel companies, as margins will continue to come under pressure.

According to Banco Santander SA, costs of coking coal jumped 68 percent and iron ore 77 percent in the first quarter of 2011.

The steel industry is projected to grow at a 5.9 percent clip this year, says the World Steel Association. Some think that's at the high end of the spectrum.

Pricing will remain a challenge in light of the new pricing system put in place where steelmakers say it's harder to pass on costs to customers because of difficulty in projecting costs.

Expectations are the second half of 2011 will be slow for the industry.

Ternium S.A. participates in the manufacture and processing of flat and long steel products for construction, home appliances, capital goods, container, food, energy, and automotive industries.

Ternium S.A. (TX) closed Wednesday at $32.30, down $0.74, or 2.24 percent.