Canaccord Genuity: Global Steelmakers Capacity Additions Positive For Industry Supply Chain - Reiterates 'Buy' on SCHN, SMS, MEA, GTI & HSC
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Price: $33.20 --0%
Rating Summary:
5 Buy, 6 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
5 Buy, 6 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
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Canaccord Genuity: Global Steelmakers Capacity Additions Positive For Industry Supply Chain - Reiterates 'Buy' Ratings on Schnitzer Steel (Nasdaq: SCHN), Sims Metal (NYSE: SMS), Metalico (NYSE: MEA), GrafTech International (NYSE: GTI), Harsco (NYSE: HSC)
Canaccord analyst said, "While it’s not clear exactly how much of the forecasted capacity additions will be EAFbased, our estimate (based on the OECD data) is that approximately 50-60 million tonnes of new EAF steelmaking capacity could come on line by 2012. We would note that basic oxygen furnace (BOF) capacity additions will also generate greater demand for ferrous scrap since it is often used as part of the melt mix."
"As for China specifically, we note that its steelmaking industry is dominated by BOFs, but the country nonetheless plans to increase the share of ferrous scrap in domestic steel production to 20% (from 15% now) over the next several years. This shift, if it occurs, would require China to obtain an estimated additional 30 million tonnes of ferrous scrap per year."
"With limited domestic supplies of ferrous scrap, all these countries will need to increase their imports (or, in Russia’s case, slow its exports) to obtain sufficient scrap metal feedstocks. These countries can also look to increase their usage of alternative raw material sources, like DRI (direct reduced iron), HBI (hot briquetted iron ), pig iron, and Mesabi nuggets."
"Assuming global steel production continues to increase and capacity expansions occur as predicted, stronger demand for ferrous scrap resources should exert upward pressure on ferrous scrap prices, in our view. Obviously, this will be music to the ears of major scrap exporters like Schnitzer Steel Industries (Nasdaq: SCHN) and Sims Metal Management (NYSE: SMS), both of which can capitalize on this trend given their considerable scrap resources and global export capabilities."
Canaccord analyst said, "While it’s not clear exactly how much of the forecasted capacity additions will be EAFbased, our estimate (based on the OECD data) is that approximately 50-60 million tonnes of new EAF steelmaking capacity could come on line by 2012. We would note that basic oxygen furnace (BOF) capacity additions will also generate greater demand for ferrous scrap since it is often used as part of the melt mix."
"As for China specifically, we note that its steelmaking industry is dominated by BOFs, but the country nonetheless plans to increase the share of ferrous scrap in domestic steel production to 20% (from 15% now) over the next several years. This shift, if it occurs, would require China to obtain an estimated additional 30 million tonnes of ferrous scrap per year."
"With limited domestic supplies of ferrous scrap, all these countries will need to increase their imports (or, in Russia’s case, slow its exports) to obtain sufficient scrap metal feedstocks. These countries can also look to increase their usage of alternative raw material sources, like DRI (direct reduced iron), HBI (hot briquetted iron ), pig iron, and Mesabi nuggets."
"Assuming global steel production continues to increase and capacity expansions occur as predicted, stronger demand for ferrous scrap resources should exert upward pressure on ferrous scrap prices, in our view. Obviously, this will be music to the ears of major scrap exporters like Schnitzer Steel Industries (Nasdaq: SCHN) and Sims Metal Management (NYSE: SMS), both of which can capitalize on this trend given their considerable scrap resources and global export capabilities."
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