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June 8, 2010 Dear Friend,
We are encouraged that domestic steel shipments
are rebounding from 60.3 million tons in 2009 towards 77 m.t. in 2010. We
are encouraged that March 2010 domestic apparent consumption per day was
278,286 tons per day up from 150,710 t/d in May 2009, but short of the near
400,000 t/d daily levels seen in June 2004 and June 2006. We also are
encouraged that the company should be profitable this quarter, U.S. Steel's
shares have "corrected" by $30 almost back to the $31.64 and $35.63 prices
we recommended the stock last July 14th and October 29th.
However, we have maintained our Neutral
investment investment rating because of March to May imported steel volumes
of over 2 million tons per month each month, potential for more imports
given firm U.S. selling prices and euro devaluations of $100 to $175 per ton
of steel ranging from hot-rolled to premium coated sheets, an estimated
21 million tons of capacity additions and a much lower domestic tonnage
level than the 109.5 million ton 2006 peak. In effect, the domestic
demand-supply balance will be about 40 million tons less favorable in 2011
or 2012 than in 2006. There is always a chance that a better opportunity to
buy comes along.
I will be visiting Bluescope Steel's (formerly
BHP Steel) Delta, Ohio joint venture with Gerdau tomorrow, which was one of
the "copycat" minimills built in the mid-1990s to imitate Nucor's pioneering
of thin slab continuous casting.
Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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