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For Immediate Release
Chicago, IL – March 16, 2012 – Today, Zacks Equity Research discusses the Metals & Mining Industry, including ArcelorMittal (MT - Analyst Report), AK Steel Holding Corporation (AKS - Analyst Report), Nucor Corporation (NUE - Analyst Report) and U.S. Steel Corp (X - Analyst Report).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/71422/Metals+%26amp%3B+Mining+Stock+Outlook+%96+March+2012
As the major shareholder (about 60%) of the metals market, the steel industry was severely bruised by the global economic downturn. But the recovery has been swift and forceful. According to the World Steel Association, world crude steel production was a record 1,527 million tons (Mt) in 2011, outperforming the 2010 record of 1,414 Mt, a 6.8% jump.
China continues to retain its status as the largest steel producing country, yielding almost half of the global output at 46%, and growing 8.9% year over year. Japan, the second largest producer country, however posted a 1.8% decline due to the earthquake. The United States remained in the third position, producing 86.2 Mt of crude steel, 7.1% higher than 2010 and comprising 6% of the total global output.
North America’s crude steel production was 118.9 Mt, an increase of 6.8% on 2010. In Asia, overall growth was noted at 7.9% and Europe rose 4.6%. As per January figures, in the current fiscal, world crude steel production was 117 Mt, a 7.8% dip from January 2011 but flat with December 2011 levels.
Reflecting on the 2011 results of the steel companies in our coverage - ArcelorMittal (MT - Analyst Report), AK Steel Holding Corporation (AKS - Analyst Report) and Nucor Corporation (NUE - Analyst Report) -- revenues increased across the board due to higher average steel prices and increase in shipments.
ArcelorMittal, the world’s largest steel producing company, produced 91.9 million tons in fiscal 2011, representing 6% of the world's steel output. ArcelorMittal’s 2011 sales increased 10% to $94 billion and for AK Steel 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. U.S. Steel Corp (X - Analyst Report), though still in red, narrowed its fiscal 2011 loss per share to 47 cents from the year-ago loss of $3.36.
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.
The steel industry had been severely affected by the global economic crisis. However, there were signs of a turnaround from the second half of 2009 which continued into 2010 and 2011 at tandem with global economic activity. Demand for steel products nonetheless remains below pre-recession levels. We expect the recovery to be slow and steady in 2012.
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.
The automotive and construction markets have historically been the largest consumers of steel. The automotive sector is showing significant promise. In February 2012, total motor vehicle sales reached the highest level since February 2008 at 15.1 million SAAR (Seasonally Adjusted Annual Rate). For the first two months of 2012, sales have averaged 14.6 million SAAR, outperforming the Street expectations.
The construction sector has been a drag on the steel companies’ earnings. However, we see some early signs of recovery in non-residential construction.
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