Zacks Industry Outlook Highlights: ArcelorMittal, AK Steel Holding, Nucor and United States Steel - Press Releases
29 Marzo 2012 - 10:30AM
Zacks
For Immediate Release
Chicago, IL – March 29, 2012 – Today, Zacks Equity Research
discusses the Steel Industry, including
ArcelorMittal (MT), AK Steel Holding
Corporation (AKS), Nucor Corporation
(NUE) and United States Steel Corp (X).
A synopsis of today’s Industry Outlook is presented below. The
full article can be read at
http://www.zacks.com/stock/news/72114/Steel+Industry+Stock+Outlook+-+March+2012
Reflecting on the 2011 results of the steel companies in our
coverage -- ArcelorMittal (MT), AK Steel
Holding Corporation (AKS) and Nucor
Corporation (NUE) -- we find revenues increasing across
the board due to higher average steel prices and increase in
shipments.
ArcelorMittal, the world’s largest steel producing company, belched
out 91.9 Mt in fiscal 2011, representing 6% of the world's steel
output. ArcelorMittal’s 2011 sales increased 10% to $94 billion
while AK Steel’s sales climbed 8% to $6.5 billion. Nucor recorded
sales increase of 21% to reach $20 billion.
In terms of profitability, Nucor stood tall with its fiscal 2011
EPS of $2.45, almost six fold the 42 cents earned in 2010.
ArcelorMittal’s EPS in fiscal 2011 plummeted 31% to $1.19. AK Steel
reversed its year-ago loss to earn 9 cents (excluding special
items) in 2011. United States Steel Corp (X),
though still in red, narrowed its fiscal 2011 loss per share to 47
cents from the year-ago loss of $3.36.
The steel companies expect volumes to improve in 2012 on recovering
demand from improving end-markets, backed by a recuperating global
economy. They expect operating results to significantly improve
from 2011 levels mainly driven by improved average realized prices
and higher shipments. Steel consumption is expected to grow in the
automotive, transportation, energy, industrial and the agricultural
sectors.
However, the European debt crisis and its potential global impact
remain an overhang on the steel industry. ArcelorMittal has idled 5
of its 25 blast furnaces in Europe. The company will continue to
align its steel growth projects to match demand situations.
Furthermore, the company’s focus on its mining business given its
more attractive returns has resulted in some planned steel
investments being deferred.
Currently, Nucor, United Steel and AK Steel retain a Zacks #3 Rank
(Hold) for the short term (1 to 3 months) that corresponds with our
Neutral recommendations in the long term. ArcelorMittal retains a
Zacks #4 Rank (Sell) and we have recently downgraded our long-term
recommendation from Neutral to Underperform.
Industry Capacity & Demand/Consumption
Dynamics
World crude steel capacity utilization ratio inched up 0.5
percentage point to 71.3% in January 2012 from December 2011 but
dipped 9.6 percentage points from January 2011. U.S. capacity
utilization ratio in January 2012 was a forty-month record high at
77.6%, an increase from the December 2011 utilization rate of
75.2%. Though the capacity utilization rate has increased
significantly from the April 2009 low level, it still remains below
the historical averages.
In the United States, apparent consumption, which is used to
measure domestic demand for steel, stood at 8.6 Mt in January 2012,
up 15.6% year over year and 11.6% from the sequentially preceding
month. When we compare it with the trough experienced in April
2009, demand was up a considerable 86.1%.
Price Trends Seen So Far
Steel prices are generally volatile, in line with the highly
cyclical nature of the global steel industry. Following an extended
period of rising prices, steel prices plunged during the financial
and economic crisis of 2008 due to the sudden drop in demand. This
was further intensified by massive industry destocking as customers
cleared their steel inventories. Steel producers in their turn
suffered the worst casualties, recording lower revenues and
margins, and even had to write down finished steel and raw material
inventories.
Steel prices saw a recovery in late 2009 that followed into 2010
but remained below the pre-financial crisis level. In 2011, steel
prices remained volatile, increasing in the first half on the back
of strong demand, higher raw material costs, improved activity for
the automotive, appliance and other industrial segments though
construction remained relatively weak in many regions.
Prices fell in the second half as demand decreased due to
uncertainty surrounding the Euro-zone sovereign debt crisis. The
fourth quarter particularly exhibited weakness due to a sharp drop
in iron ore prices in October and as customers renewed destocking
considering the uncertain economic environment.
So far in 2012, the steel industry is seeing some price hikes. We
feel that the recovery in pricing momentum will be driven by a
reviving economy, no further crisis in the Euro-zone and a rebound
in construction activity in the developing countries, in particular
China, India and South Korea.
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AK STEEL HLDG (AKS): Free Stock Analysis Report
ARCELOR MITTAL (MT): Free Stock Analysis Report
NUCOR CORP (NUE): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis Report
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