Analyst: Steel companies’ shares fall as producers overreact to brief spike in Chinese demand
NEW YORK (AP) — Shares of ArcelorMittal and other steel makers fell hard Monday after an analyst warned that prices are falling and inventories are building.
UBS analyst Andrew Snowdowne downgraded shares of Luxembourg-based ArcelorMittal, the world’s largest steel maker, to “Neutral” from “Buy” because of what he described as an overreaction by global steel suppliers to what may be a temporary pickup in Chinese demand.
Following Chinese government stimulus initiatives, prices rose in December 2008. That, in turn, sparked a jump in global steel production. However, in recent weeks, Chinese steel demand has retreated, decreasing prices and increasing inventories.
“The problem seems to be that supply has come back on too fast, with Chinese crude steel production for January reported up 9.9 percent month-over-month to 41.5 million metric tons,” Snowdowne wrote in a client note.
“After several months of substantial price drops and production cuts as end users destocked, mills reacted to rising prices as a chance to recoup losses and regain lost market share.”
He also warned that without an increase in end-user purchasing, prices will fall and traders will refuse to take stock from the mills.
In afternoon trading, ArcelorMittal shares fell $3.09, or 13.8 percent, to $19.33. United States Steel Corp. declined $3.11, or 12.5 percent, to $21.69, while AK Steel Holding Corp. lost 86 cents, or 12.5 percent, to $6.04.
Source: http://news.indiamart.com/news-link.html
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