The Zacks Analyst Blog Highlights: ArcelorMittal, U.S. Steel, Nucor, AK Steel and Steel Dynamics

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Dec 01, 2014, 09:30 ET

CHICAGO, Dec. 1, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the ArcelorMittal (NYSE:MT-Free Report), U.S. Steel (NYSE:X-Free Report), Nucor (NYSE:NUE-Free Report), AK Steel (NYSE:AKS-Free Report) and Steel Dynamics (Nasdaq:STLD-Free Report).

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Here are highlights from Friday's Analyst Blog:

Global Steel Output Stalls

Global crude steel production flattened in October as declines across China, Japan and the U.S. offset higher output in the European Union and a healthy growth in India – according to a recent World Steel Association ("WSA") report. As witnessed in September, steel production continued to be affected by economic cooling in China – the world's biggest steel maker.

The international trade body for the iron and steel industry said that crude steel production for 65 reporting nations clocked 137 million tons (Mt) in October, flat year over year. This follows a modest 0.1% decline last month.

October reading showed a mixed picture across major steel producing nations in Asia with output falling in China and Japan while moving up in India and South Korea.

China's steel production clipped 0.3% year over year to 67.5 Mt in the reported month after remaining flat in September. A downturn in the country's housing market, persisting credit crunch and tepid infrastructure investment are hurting steel demand there. China's industrial output rose 7.7% in October, decelerating from an 8% gain in September, providing fresh evidence of sluggishness in the world's second-largest economy.

Output also slipped 0.5% to 9.4 Mt in Japan – the second-biggest producer. India remained the fourth-largest steelmaker with production climbing 8.5% to roughly 7.1 Mt, backed by the announcement of investment in big-ticket infrastructure projects by the nation's new government. South Korea raked in a 4.5% gain to 6.2 Mt. Total output in Asia inched up 0.6% to 92.1 Mt.

In North America, crude steel production slipped 0.7% to 7.3 Mt in the U.S. – the third-largest producer. Output in Canada, however, jumped 9.4% to around 1.2 Mt. Overall production for the region edged up 0.3% to roughly 10.2 Mt in October.

Overall output in the Europe Union rose 1.5% to around 14.9 Mt. Germany – the biggest producer in the region – produced 3.5 Mt, down 5.9%. Output declined 5.4% in Italy to 2.1 Mt and was also slipped 0.4% in Spain to 1.3 Mt. Production, however, jumped 15% in France to around 1.5 Mt while the UK recorded a 0.3% gain to roughly 1.1 Mt

Production in the Middle East leapt 8.4% to 2.5 Mt on gains across Iran, Qatar and Saudi Arabia. Africa, however, saw a 10.1% decline to 1.3 Mt in October.

Among other notable producers, production from Turkey sagged 11% to 2.7 Mt. Russia recorded a 1.6% gain to 5.8 Mt while Ukraine – which have been battered by fierce conflict with Russia – saw a 28.7% plunge in output to 1.9 Mt, leading to a 6.3% fall in overall output in the C.I.S. region. Production from Brazil, the largest producer in South America, rose 2.7% to around 3.1 Mt.

October data showed a decline in steel capacity utilization. According to WSA, crude steel capacity utilization ratio for the reporting countries was 74.7% in October, down from 77.3% a year ago and 76.1% in the previous month.

Steelmakers including ArcelorMittal (NYSE:MT-Free Report), U.S. Steel (NYSE:X-Free Report), Nucor (NYSE:NUE-Free Report), AK Steel (NYSE:AKS-Free Report) and Steel Dynamics (Nasdaq:STLD-Free Report) continue to contend with challenging market fundamentals and weak pricing. Overcapacity in the industry and a flood of cheap imports have kept steel prices under pressure.

Factoring in the weaker-than-expected performance in emerging and developing economies in first-half 2014, the WSA has truncated its short-term outlook for global steel usage, which is now expected to rise 2% in 2014 (down from 3.1% expected earlier). World steel demand has been forecast to grow at the same pace next year. A slowdown in China, which has been a major drag on the steel industry lately, was mainly instrumental in the downward revision of the outlook.

The steel industry faces challenges in form of an expected deceleration in steel usage in China due to weaker infrastructure investment growth and a slowdown in the country's property market that account for a significant part of its steel consumption. After seeing high demand levels over the past few years, steel usage in China is expected to cool down and rise just 1% this year and further slip to a 0.8% gain in 2015. Moreover, reports of weakness in Germany have signaled a slowdown in the much awaited recovery in the Eurozone economy.

Nevertheless, a gradually convalescing economy, strong momentum in the automotive market and a rebound in commercial construction and housing markets are expected to provide a much-needed thrust to the U.S. steel industry. Demand in India is also expected to pick up speed, driven by structural reforms from the new government.

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