Steel prices and shares

[OnMyWay]

6 hours ago, Joey G said:

 

The companies themselves are profitable...  but it isn't showing up in the dividends to shareholders.... the dividends are pitifully low. Case in point, US Steel paying a whopping .15% annual dividend... yep, thats 15/100 of 1 percent.... might easier to measure in peso's I think.  If you bought steel stocks a year ago, sell now... if you think steel stocks will out play everything... make someone happy and buy the stock they selling today 

Steel is super cyclical.  You can make a lot of money up or down.  I read somewhere that the steel companies are shy on increasing the dividends now, even though they are cash rich, because they got burned in the last couple of steep downturns.  Instead, they are doing stock buybacks and debt reduction, which also adds a lot of value for stockholders.

I own CLF and X.  I think they have another year to run.  I might make some side bets next month.  Someone mentioned that there is always a big drop on or near the options expiration date, then they build back up to next month's expiration date.  They dropped a lot yesterday.  I looked back and this is true, but the overall trend is very positive.  I might try to play this next month and buy some puts the week before expiration.

Both CLF and X are subject to extreme swings lately.  Don't buy if you don't have the stomach for it.  There is a lot of market manipulation, probably driven by computerized trading, especially near options expiration.

CLF is a good buy right now at 23.  I am not a financial consultant, the usual disclaimer.  Do your own due diligence.  The CEO is an entertaining guy and he cares about the shareholders.

[OnMyWay]

6 minutes ago, OnMyWay said:

Case in point, US Steel paying a whopping .15% annual dividend... yep, thats 15/100 of 1 percent

P.S.  X is paying a 1 cent dividend.  Another thing I read but have not validated.  Instead of completely eliminating a dividend, a company will pay 1 cent because that allows them to stay in some mutual funds and ETFs that only include dividend paying companies.

[OnMyWay]

13 hours ago, Dave Hounddriver said:

On a whim, I was thinking of buying some penny stocks in Labrador Iron Mines exploration division until I read their August financials.  The long term for iron is not bullish.

"In the longer-term analysts generally expect iron ore prices to retreat from recent highs with Brazilian supply
recovering, however government Covid relief programs and infrastructure investment worldwide are expected to
create continued medium term demand for steel and thus for iron ore. "

This just appeared out of the blue on my you tube feed.  Of course it is not really out of the blue because Google knows everything I do!

I find these graphs fascinating!  Watch the Soviet Union in the 1990s.  I wonder if that is correct?  It disappears.

CLF bought a mining partner last year and I think they are capable of supplying all of their own iron ore.  Not sure.

 

[OnMyWay]

On 8/20/2021 at 1:02 PM, GeoffH said:

They have been yes but the iron ore price is heading sharply down due to the drop in Chinese demand and that will flow on to a drop in demand for steel.

Another interesting video from a year ago.  Any changes in AU due to the China cutbacks?

https://youtu.be/xFE1lAPh0g4

[GeoffH]

There has been a lot of talk recently about how Chinas 5 year plan to reduce green house gas emmissions will impact iron ore imports and they are down over the last few months albeit from a high point earlier in the year.

https://www.afr.com/world/asia/chinese-iron-ore-demand-slips-as-steel-curbs-bite-20210809-p58h8p

 

My guess is that once the world starts to come out of the Covid pandemic over the next year or two that there will be plenty of pent up demand to soak up iron ore production over the medium term and that this price drop won't last.

However China looks like being a permanent drop.

Edited August 21, 2021 by GeoffH

[fototek1]

On 8/21/2021 at 2:09 AM, OnMyWay said:

Steel is super cyclical.  You can make a lot of money up or down.  I read somewhere that the steel companies are shy on increasing the dividends now, even though they are cash rich, because they got burned in the last couple of steep downturns.  Instead, they are doing stock buybacks and debt reduction, which also adds a lot of value for stockholders.

I own CLF and X.  I think they have another year to run.  I might make some side bets next month.  Someone mentioned that there is always a big drop on or near the options expiration date, then they build back up to next month's expiration date.  They dropped a lot yesterday.  I looked back and this is true, but the overall trend is very positive.  I might try to play this next month and buy some puts the week before expiration.

Both CLF and X are subject to extreme swings lately.  Don't buy if you don't have the stomach for it.  There is a lot of market manipulation, probably driven by computerized trading, especially near options expiration.

CLF is a good buy right now at 23.  I am not a financial consultant, the usual disclaimer.  Do your own due diligence.  The CEO is an entertaining guy and he cares about the shareholders.

CLF was a great buy at $6-$10. I am steering clear now in the 20's. Time will tell. I have made some bad choices in the past.

[OnMyWay]

On 8/23/2021 at 3:59 AM, fototek1 said:

CLF was a great buy at $6-$10. I am steering clear now in the 20's. Time will tell. I have made some bad choices in the past.

Google Credit Suisse steel.  If the CLF CEO is able to keep his promises, I expect CLF to do better than that.  He plans to pay off all debt by EOY.  Free Cash Flow is huge so then he either does buy backs or dividends.

I don't have access to the reports but here is a snip that was posted on Reddit.

=========================================================

We now forecast 2021 HRC prices at $1570/t and 2022 prices at $1200/st; note the 2022 HRC forward curve is $1320/t.

Mill Outages and Auto Rebuild Key for 2H: Many mills deferred maintenance to capture higher prices in 2Q will face more sizeable outages in 2H. The net supply impact could be as high as 1.3-1.7mt, a material figure. At the same time, automotive production remains depressed from chip shortage (~2mm units in 2021) and OEMs need to significantly increase production to rebuild inventories. Given spot is now a quarterly lag given lead times the “effective” forward curve for 2022 is really $1465/st given 4Q spot will flow into 1Q. We think Street is significantly too low for ASP realizations for 2022.

Strong 2022 Demand Outlook Reinforced with Restock Event: Steel consumers are running very low inventory with months of supply on hand near 1.3-1.4 compared to long-term averages of 2.2-2.4. As new EAF supply ramps in 2022 prices will clearly moderate but a major restocking event is likely to occur once the market loosens in our view. We forecast US steel demand to increase 5% in 2021 driven by much higher auto production, further recovery in construction led by warehouse/data center, strong growth in solar array / wind, and support from pent-up housing demand (residential, appliance, HVAC). We think a restock could add a meaningful 2-3% of growth to real demand as well.

New Supply Will Take Time to Ramp Up: New plants generally need 6-9 months to fully ramp up and therefore we don’t see material new supply into the US market until 2Q or 3Q of next year. Steel Dynamics plant in Sinton, Texas will produce ~2.1-2.2mt and much of this volume will seek to displace Gulf Coast imports, take share in Mexico, and clearly some regional domestic share. We estimate the US sheet market will remain in material deficit into 1Q of 2022. We forecast net supply additions of 4.2mt in 2022 against 3.1mt of new demand (5% growth on 2021e US sheet demand of 61mt). Restocking could easily add another 1-2mt to demand given how low stocks are today.

New Steel Price Deck – Approaching Unreasonable Speed: We think steel prices can grind higher into September but do expect some pull back at year end on seasonality. We now forecast 2021 HRC at $1570/st and 2022 HRC at $1200/st (previous was $925/st) and accordingly raise TPs and EPS estimates across our steel coverage. We remain very bullish on the sector as we see estimates as way too low and valuations very compelling, even off price deck for 2022 that is ~40% below spot. The forward curve is now up to $1340/st for 2022 hot-rolled sheet. Our top picks are Cleveland-Cliffs, Nucor, Steel Dynamics, and US Steel. We remain Neutral on Commercial Metals.

[Jollygoodfellow]

On 8/22/2021 at 7:27 AM, GeoffH said:

There has been a lot of talk recently about how Chinas 5 year plan to reduce green house gas emmissions will impact iron ore imports and they are down over the last few months albeit from a high point earlier in the year.

Link in that post if for paid subscribers to the paper or site.