Tag Archives: TS

Steel: get ready for Posco, Mechel

After months of conflicting signals, the markets will start getting clarity on just what is going on in the steel industry once Korea’s Posco and Russia’s Mechel report their quarterly results.

Posco (PKX) is currently scheduled to announce its second quarter tonight. Analysts are looking for a significant improvement on both the top and bottom line: a profit of $11.57 a share on revenue of around $6.9 billion would not be too far off consensus.

Mechel (MTL) is up on Wednesday. Consensus here is for 13 cents a share in profit on about $1.84 billion in revenue.

As always, a substantial surprise in either direction on either stock will probably fuel upgrades (or downgrades) and volatility. However, you really want to get these releases and drill down into how these companies characterize the operating environment last spring:

* Was demand from China and other key markets strong or slowing?

* Did quarterly iron ore pricing hurt?

* Will the third quarter be tough, “challenging” or outright apocalyptic?

* Who is cutting capacity and prices in order to keep their business on track?

The other big global steel mills will not report until the end of this month at the earliest. The more we know now, the better we can update our expectations of what those reports from Tenaris (TS) Gerdau (GNA), Siderurgica Nacional (CSN) and the mothership itself, ArceloMittal (MT), will contain.

Emerging Markets Insight Steel Stocks

Schlumberger to Buy Smith International in $11.34 Billion Deal

Global oilfield-services provider Schlumberger Ltd. (SLB) says it will acquire Smith International Inc. (SII) in an all-stock deal of $11.34 billion.

This is all about exploiting harder to drill technology in places like the Gulf and off the coast of Brazil and the Arctic — all emerging market core production places.

The deal also puts the wheels in motion on more M&A in the sector. Is

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Tenaris Rallies on China Steep Pipe Dumping

Tenaris (TS) is 58 percent of the seamless pipe market in North America, and removal of cheap pipe from the Chinese undercutting the market has been a major catalyst to the stock. But is the rally real?

We also received comments last week from CEO Paolo Rocca about demand for steel pipe that will come from a switch from coal to natural gas next year after a huge move down in gas prices also supporting the story. In two weeks the stock is up 27 percent aided by a couple of upgrades.

JP Morgan has a $40 price target which now is within 10 percent. But is this too much too fast? I think so, since the stock is overbought at these levels with an 83 RSI. Wait for the froth to come off this and then get back on board.

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