In talking to analysts about our special focus on steel this week, we came across two analysts who had very different perspectives about where the steel space is headed in 2008. Dana Guido of Lehman Brothers Inc., while seeing some positives in 2008, is still neutral on steel while Mark Parr of KeyBanc Capital Markets sees the possibility of dynamic opportunities in steel in 2008. Mark Parr, Keybanc Capital Management:
“If you look at our current pricing levels in the global context, US pricing right now for flat-rolled products is lower than it is in China and it’s significantly lower than it is in Southern Europe. So there is plenty of room for pricing to move here in the US without any economic pickup and if the economy continues to stumble along, we are going to see higher prices emerge in 2008 and stronger volume from the mills. If we do get an economic pickup in the first part or, say, toward the middle of 2008, this could become a very, very dynamic situation for the domestic producers.
Dana Guido, Leman Brothers, Inc.:
“We are neutral on steel for 2008. While the supply side looks good with low inventories and low imports, we have concerns on the demand side. Lehman Brothers is forecasting US GDP growth to average about 1.9% in 2008, down from 2.2% in 2007. In addition, our autos analyst is expecting a 5% decline in auto production in 2008. So while we believe that supply fundamentals can support steel prices at current levels, soft demand may diminish service center restocking and limit price increases.”
For the full Steel report, including interview with analysts from a wide range of perspectives and stock picks, click here.
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