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● Despite slowdown concerns in most developed markets (weak
PMI and several surveys) and monetary tightening in developing
markets, Jul-11 was the third consecutive month of a better-thanseasonal trend in global steel production ex. China (Figure 3).
● We have been surprised by the geographically widespread nature
of growth in this environment. In the absence of meaningful
production cuts, steelmakers are only perpetuating their margin
squeeze (no pricing power, RM costs stay high).
● The EU (down 11% MoM versus 7% seasonal) and India (flat
MoM versus seasonal +3.5%) were the only geographies not
showing strong volume growth: clearly, uncertainty in the EU and
lack of reforms/executive decisions in India are hitting steel
demand growth. European spot steel prices and volumes have
been falling, potentially pushing Tata Steel Europe into losses.
● We maintain our negative stance on the sector, as growth in
domestic demand has clearly slowed from the high teens to low
single digits. Further, due to the high gearing of all companies that
we cover, we recommend investors to sell on any bounce.
Despite slowdown concerns in most developed markets and monetary
tightening in developing markets, a better-than-seasonal trend in
global steel production ex. China stretched to three months in July
(Figure 3). Not surprisingly, given the steep 8.5% fall seen from May
to July last year (only 2% this year), YoY growth was 8.5%. Chinese
production grew a strong 14.5% YoY, driving global production growth
to 11.5% YoY. The EU and India, however, were weak: production fell
11% MoM in the EU (a seasonal 7% fall) and was flat MoM in India
(seasonal +3.5%).
Surprisingly strong production in the face of squeezed margins and
slowing demand creates a bigger overhang on the sector. With prices
coming off relatively sharply in July in some geographies, we now
expect August to see a sharper fall sequentially.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● Despite slowdown concerns in most developed markets (weak
PMI and several surveys) and monetary tightening in developing
markets, Jul-11 was the third consecutive month of a better-thanseasonal trend in global steel production ex. China (Figure 3).
● We have been surprised by the geographically widespread nature
of growth in this environment. In the absence of meaningful
production cuts, steelmakers are only perpetuating their margin
squeeze (no pricing power, RM costs stay high).
● The EU (down 11% MoM versus 7% seasonal) and India (flat
MoM versus seasonal +3.5%) were the only geographies not
showing strong volume growth: clearly, uncertainty in the EU and
lack of reforms/executive decisions in India are hitting steel
demand growth. European spot steel prices and volumes have
been falling, potentially pushing Tata Steel Europe into losses.
● We maintain our negative stance on the sector, as growth in
domestic demand has clearly slowed from the high teens to low
single digits. Further, due to the high gearing of all companies that
we cover, we recommend investors to sell on any bounce.
Despite slowdown concerns in most developed markets and monetary
tightening in developing markets, a better-than-seasonal trend in
global steel production ex. China stretched to three months in July
(Figure 3). Not surprisingly, given the steep 8.5% fall seen from May
to July last year (only 2% this year), YoY growth was 8.5%. Chinese
production grew a strong 14.5% YoY, driving global production growth
to 11.5% YoY. The EU and India, however, were weak: production fell
11% MoM in the EU (a seasonal 7% fall) and was flat MoM in India
(seasonal +3.5%).
Surprisingly strong production in the face of squeezed margins and
slowing demand creates a bigger overhang on the sector. With prices
coming off relatively sharply in July in some geographies, we now
expect August to see a sharper fall sequentially.
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