Steel's (SUTR) (HSC) (CPSL) (SID) (ROCK) Face Volatility

Steel companies Sutor Technology Group, Ltd. (Nasdaq:SUTR), Harsco Corporation (NYSE:HSC), China Precision Steel, Inc. (Nasdaq:CPSL), Companhia Siderurgica Nacional (NYSE:SID) and Gibraltar Industries, Inc. (Nasdaq:ROCK) are under pressure as costs mount for raw materials and steel demand slows.

A lot of uncertainty surrounds the steel sector as evidenced by 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.

In the short term Arcelor was able to offset higher costs of raw materials by boosting prices, but for the overall steel industry it's questionable as to how high and long they'll be able to do that.

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.

Steel's (SUTR) (HSC) (CPSL) (SID) (ROCK) Face Volatility

Steel companies Sutor Technology Group, Ltd. (Nasdaq:SUTR), Harsco Corporation (NYSE:HSC), China Precision Steel, Inc. (Nasdaq:CPSL), Companhia Siderurgica Nacional (NYSE:SID) and Gibraltar Industries, Inc. (Nasdaq:ROCK) are under pressure as costs mount for raw materials and steel demand slows.

A lot of uncertainty surrounds the steel sector as evidenced by 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.

In the short term Arcelor was able to offset higher costs of raw materials by boosting prices, but for the overall steel industry it's questionable as to how high and long they'll be able to do that.

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.

Steel's (TX) (SYNL) (ROCK) (CHOP) (STLD) and China Demand

As goes China so goes the demand for steel, and in that regard it doesn't look good for steel companies like Ternium S.A. (NYSE:TX), Synalloy Corp. (Nasdaq:SYNL), Gibraltar Industries, Inc. (Nasdaq:ROCK), China Gerui Advanced Materials (Nasdaq:CHOP) and Steel Dynamics (NASDAQ:STLD), which are going to be pressured in the years ahead from declining demand from the Middle Kingdom.

According to the China Iron & Steel Association, the Chinese government is pushing to slow down economic growth, which will result in demand for steel in the country to slow down.

Estimates under the current scenario for the steel sector have steel consumption declining in China by a minimum of 2.6 percent to as high as 4.6 percent in 2011.

Globally it doesn't look good for the next five years or so either, as the top estimates are for steel demand to grow at a 5 percent rate annually, although many think it'll be less than that.

In the short term, the U.S. steel industry should ship product at 14 percent above 2010 levels, reaching about 95 million tons in 2011.

All the companies are being affected by soaring iron ore prices and other inputs, which are putting stress on margins and earnings because buyers are hesitating to acquire product at too high of prices; something that will continue for several years.

For the steel industry, there isn't much to be optimistic about, no matter how the situation is spun. It's going to remain tough for some time.

Steel Dynamics closed Wednesday at $17.36, falling $0.41, or 2.31 percent.

Steel Firms (NUE) (CHOP) (SID) (ROCK) (GNI) Pressured on Low Growth Outlook

The steel sector, even with some strong recent quarters from companies, looks weak, as over the next five years it is projected to grow at a pace of about 5 percent or less annually, placing downward pressure on steel producers like Nucor (NYSE:NUE), China Gerui Advanced Materials (Nasdaq:CHOP), Companhia Siderurgica Nacional (NYSE:SID), Gibraltar Industries, Inc. (Nasdaq:ROCK) and Great Northern Iron Ore Proper (NYSE:GNI). And that's the more positive outlook by most analysts. A large number don't believe growth will even happen at that rate.

A majority of steel companies are being pressured to increase 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 completely, because it's not. But rising demand in some segments 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 in some segments, 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.

Nucor closed Friday at $46.96, gaining $0.47, or 1.01 percent.

Schnitzer (SCHN) (USAP) (MEA) (ROCK) (CPSL) 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 producers like Schnitzer Steel Industries (NASDAQ:SCHN), Universal Stainless & Alloy Pr (Nasdaq:USAP), Metalico Inc. (AMEX:MEA), Gibraltar Industries, Inc. (Nasdaq:ROCK) and China Precision Steel, Inc. (Nasdaq:CPSL); 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.

Ternium (TX) (MTL) (ROCK) (CPSL) Close Mixed on Growth, Cost Concerns

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 producers like Ternium S.A. (NYSE:TX), Mechel OAO (NYSE:MTL), Gibraltar Industries, Inc. (Nasdaq:ROCK) and China Precision Steel, Inc. (Nasdaq:CPSL), which closed mixed on Tuesday. And that's the more positive outlook by the majority of analysts. Many don't think growth will even happen at those modest levels.

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.

Of course there a large varieties of companies with steel exposure, and each segment of the sector can represent strengths or weaknesses. So each unit and company will have to be watched closely for performance of course.

There's no way to spin the outlook for the steel industry in a positive manner. The industry will struggle for years even in the midst of strong demand as it attempts to work through the balance between steel demand, rising inputs, and ability for companies and countries to afford price increases from producers.

Some winners will emerge, but over time it's not easy to pick any one that's going to stand out. Some have looked to larger companies who may be able to navigate through the higher costs better, but we'll see if that's the case, as it isn't always that simple because of the wide variety of products and costs and pricing power with each one.

Friedman (FRD) (ROCK) (CMC) (SUTR) Drop as Commodities Correct

A general correction in commodities prices as a result of the plunge in oil prices pressured the steel sector, with Friedman Industries (AMEX:FRD), Gibraltar Industries (Nasdaq:ROCK) Commercial Metals (NYSE:CMC) and Sutor Technology (Nasdaq:SUTR) all closing down Tuesday.

Crude oil prices for May delivery were down as much as 63 cents, or 0.6 percent, to $105.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $106.01 at 10:14 a.m. Sydney time. Yesterday, it dropped $3.67 to $106.25. Prices fell 5.9 percent on April 11 and 12.

The U.S. raised its crude-oil price estimate for 2011 to an average $106.38 a barrel from $101.77 in March, according to the Energy Department’s Short-Term Energy Outlook.

Friedman Industries closed Tuesday at $10.43, falling $0.07, or 0.67 percent. Sutor Technology closed at $1.62, down $0.02, or 1.22 percent. Commercial Metals closed at $16.42, dropping $0.06, or 0.36 percent. Gibraltar Industries ended the session at $11.48, declining $0.59, or 4.89 percent.

Gibraltar Industries' (NASDAQ:ROCK) EPS Estimates, PT Lowered

While Jefferies sees improvement with Gibraltar Industries (NASDAQ:ROCK), they lowered their price target and EPS estimates on the company based on operational improvements and stronger financial position.

Jefferies said, "Gibraltar Industries manufactures and distributes various building products to North American and European markets. We believe the company's reduced cost structure, strengthened financial position, and improving operating efficiency will drive operating leverage as residential and non-residential markets modestly rebound."

EPS estimates for full year 2010 were lowered from $0.30 to $0.05, and for full year 2011 from $1.00 to $0.50. Revenue estimates for full year 2010 were dropped from $712.8 million to $680 million, and for full year 2011 from $809.8 million to $748 million.

Jefferies reiterated their "Buy" rating on Gibraltar Industries, which closed Wednesday at $10.79, up $0.06, or 0.56 percent. They lowered their price target on them from $16 to $13.