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Zacks Industry Outlook Highlights: Nucor, United States Steel, AK Steel Holding, Steel Dynamics and ArcelorMittal

For Immediate Release

Chicago, IL - September 25, 2015 - Today, Zacks Equity Research discusses the Steel, part 1, including Nucor Corporation ( NUE ), United States Steel Corp. ( X ), AK Steel Holding Corporation ( AKS ), Steel Dynamics Inc. ( STLD ) and ArcelorMittal ( MT ).

Industry: Steel, part 1

Link: http://www.zacks.com/commentary/57321/steel-industry-stock-outlook---sept-2015

The steel industry has long been considered the "backbone" of the economy. While the strong automobile and improving construction sectors continue to support demand, the steel industry is currently facing three major headwinds: falling prices, economic slowdown in China and foreign steel import into the U.S.

Per the World Steel Association, global steel production decreased 2.2% to 948 metric tons (Mt) within the January-July period as production shrank across all the regions, barring Europe and the Middle East. China, the world's largest steel maker, continued to disappoint with a 1.8% decline, whereas India fared better, registering a 4.3% increase in production.

Economic slowdown in China has dealt a massive blow to the global steel industry. China's steel industry is still reeling under overcapacity with barely any signs of recovery. The Purchasing Managers Index (PMI) for the Chinese steel industry has stayed below the mark of 50 for 17 straight months, signaling a persistent conflict between supply and demand. Steel usage is expected to dip 0.5% in 2015 and 2016 as per the World Steel Association's short range outlook published in April this year.

U.S. steel mills remain hobbled by depressed capacity utilization and a torrent of unfairly-traded imports. The domestic market continues to be inundated with cheap imports from overseas producers, especially from China. American steel makers including Nucor Corporation ( NUE ), United States Steel Corp. ( X ), AK Steel Holding Corporation ( AKS ), Steel Dynamics Inc. ( STLD ) and ArcelorMittal USA, a part of ArcelorMittal ( MT ), have suffered heavily due to high levels of imports, reflected by decline in orders, idling of mills and layoffs across the nation.

And to top it all, the slump in oil prices had a significant negative impact on steel prices given the industry's 10% exposure to the energy sector. Steel demand from energy companies is expected to go down when exploration companies reduce their capital expenditure budgets. U.S Steel, which is the biggest supplier to energy companies in North America (along with AK Steel and ArcelorMittal) continues to be impacted by the slowdown.

Since steel companies enter into long-term supply agreements with their suppliers, they have not been able to take full advantage of lower iron ore prices. When these supply agreements are renegotiated this year, they are likely to be executed at lower prices and hence, help in reducing unit production costs of the steel players.

While companies like ArcelorMittal and U.S. Steel that produce most of their iron ore requirements through captive mines are unlikely to benefit from this, companies like AK Steel will have a competitive edge as they are less vertically integrated.

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NUCOR CORP (NUE): Free Stock Analysis Report

UTD STATES STL (X): Free Stock Analysis Report

AK STEEL HLDG (AKS): Free Stock Analysis Report

STEEL DYNAMICS (STLD): Free Stock Analysis Report

ARCELOR MITTAL (MT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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