德银-欧洲-钢材市场-钢材价格追踪：价格继续上涨，南部与北欧价格的差距缩小-20180131-22页_1mb

Steel Market Summary - January 31, 2018

Core Content

The steel market in Europe, the US, and China experienced a period of price increases and margin expansion, with significant implications for industry valuation and investment opportunities. The report highlights the strong momentum in steel prices, driven by high global price levels, protectionism, demand trends, and industry consolidation. It emphasizes that steel prices are currently priced for margin contraction, but the outlook suggests potential for further margin expansion, which could lead to significant earnings upgrades.

Key Market Trends

HRC (Hot Rolled Coil) Prices

• Northern Europe: Prices rose by E5 to E599 (up USD11 to USD738), with a 3-month increase of E10.
• Southern Europe: Prices increased by E13 to E569 (up USD21 to USD701), with a 3-month increase of E19.
• US: Prices rose by USD9 to USD860 (up E2 to E697).
• Chinese Exports: Prices increased by USD7 to USD575, with a 3-month increase of USD30.
• Price Differential: The spread between Chinese and Southern European prices increased to USD92, above the two-year average of USD59.

Plate Prices

• Northern Europe: Prices increased by E5 to E599 (up USD11 to USD738), with a 3-month increase of E69.
• Southern Europe: Prices increased by E13 to E569 (up USD21 to USD701), with a 3-month increase of E79.
• US: Prices increased by USD9 to USD860 (up E2 to E697), with a 3-month increase of USD187.

Iron Ore Prices

• Fines 62% Fe: Prices fell by USD1/dmt to USD74/dmt.
• Coking Coal: Premium coking coal prices fell by USD2 to USD214, with a 3-month decrease of USD33.

Scrap Prices

• Europe: Prices fell by USD7 to USD338/t.
• Turkey: Prices fell by USD10 to USD356/t.
• Projected QoQ Increase: If current prices remain stable until end-Q1, European scrap prices could increase by USD31.

Main Points

• Steel Price Momentum: Steel prices have shown strong momentum, with potential for further margin expansion, which could lead to significant earnings upgrades.
• Top Picks:
  • ArcelorMittal (MT.AS): Valued at EUR30.17, with a target price of EUR36.00. Strong cash flow (9-11% FCF yield), valuation, and additional upside optionality.
  • Voestalpine (VOES.VI): Valued at EUR53.10, with a target price of EUR57.00. Strong underlying cash flow (8-9% FCF yield) and a less volatile business model.
• Valuation Methodologies: A blend of forward EBITDA and DCF is used for valuation. For ArcelorMittal, the DCF model uses a WACC of 7.9% and a terminal growth rate of 2%. For Voestalpine, the DCF model uses a WACC of 7.7% and a terminal growth rate of 1%.
• Industry Risks:
  • Weaker steel prices and demand divergence from the steel sector scenario.
  • Higher raw material and operating costs.
  • Political influence in the steel trade.
  • Execution and legal risks related to growth projects.
  • FX rate fluctuations.

Key Companies and Their Performance

ArcelorMittal

• Price (29 Jan 18): EUR 30.17
• Target Price: EUR 36.00
• 52-Week Range: EUR 17.84 - 30.63
• Market Cap (USDm): 37,993
• FCF Yield (%): 9.7 (2018E)
• Dividend Yield (%): 1.1 (2018E)
• Net Profit (2018E): USD 3,826m
• Free Cash Flow (2018E): USD 4,291m

Voestalpine

• Price (29 Jan 18): EUR 53.10
• Target Price: EUR 57.00
• FCF Yield (%): 8-9%
• Underlying CF: Strong
• Business Model: Less volatile

Price Announcements

• Flats:
  • AK Steel: Increased prices by $30/st for all carbon flat-rolled sheet products.
  • NLMK: Increased prices by $30/st for all carbon flat-rolled sheet products.
  • ArcelorMittal: Increased US sheet prices by $30/st.
  • NSSMC: Increased domestic sheet prices by Yen 3,000/mt.
• Longs:
  • Icdas: Decreased rebar prices for 12-32mm diameter by Lira 60 ($16)/mt.
  • Jiujiang Wire Co.: Increased domestic rod prices by Yuan 50/mt.
  • Jiangsu Shagang: Decreased rebar prices by Yuan 300/mt.
  • Gerduau Long Steel: Increased rebar prices by $40/st in Florida and C$50/st in Canada.
• Stainless:
  • Outokumpu: Increased February alloy adjustment factor for type 304 by €11/mt and surcharge for type 316 by €116/mt.
  • NSSC: Increased domestic stainless prices by Yen 10,000/mt.
  • Aperam: Increased December alloy adjustment factor for type 304 by €94/mt and surcharge for type 316 by €125/mt.
  • Nissin Steel: Increased domestic austenitic CRC prices by Yen 20,000/mt.

Summary of Valuation Metrics

Conclusion

The steel market is showing strong price momentum, with potential for further margin expansion. ArcelorMittal and Voestalpine are highlighted as top picks due to their strong cash flow, valuation, and business models. The report underscores the importance of monitoring macroeconomic factors, steel prices, raw material costs, and political influences in the steel trade. Despite the current momentum, risks remain, including weaker demand, higher costs, and geopolitical factors.