Steel story to look good within a short time span

Making steel story more palatable: TISCO is doing well today after I gave a call on the morning on the steel sector. The steel sector, which enjoyed an extremely strong upturn and windfall profits in 2004, has seen steel prices fall by as much as 30% since the second half of 2005 in the Asia-Pacific region. However, after the price correction, a strong rebound is on the horizon. The price of hot-rolled steel, a benchmark product, is expected to recover to above $500 per metric ton (from below $400 per metric ton) in the second half of 2006—a very profitable level that is likely to strongly boost steelmakers' earnings in the months ahead. The Steel prices might rise in the next August. There are still huge demands of steel in Europe and Latin America. Though the Chinese production is increasing at a rate of 30 % per annum its demand is also increasing at 20% per annum. Then there are world demand followed by domestic demand. Besides the rise in Coal and Iron Ore prices will force the steel companies to raise the prices (those which are not integrated will be affected most). The steel additives like Molybdenum, is also firm in the International markets. Sixty percent of molybdenum consumption is used for stainless steels, super alloys or lower alloy steel. An example: a popular form of stainless steel called S31600 (Type 316), containing three to four percent Moly. This type of stainless steel was used to clad the exterior of tallest building in the world – the Petronas Towers in Kuala Lumpur in Malaysia, London's Canary Wharf and in many other architectural applications in marine coastal environments. Hence the constant increase in the price of raw material will push up the steel prices in the near future. Also since Mittal Steel Ltd has become a huge conglamerate, it could call the shots in the industry within a short time. It has already increased the price of Steel in Africa, soon it might folow it up with price rise in other parts of the world. It is aleady eyeing closed down steel mills in China, to create further monopoly in the International markets. In these days of competition those players who do not have their own mines, will either die a natural death or will be taken over by the larger players--there is no option left. THE CAPACITY ADDITION IN CHINA CANNOT CONTINUE FOR YEARS and the shortage of the market will start within a short time. This glut in the Asian markets is mainly due to monsoon and China raising output. The demand will again start to grow as the construction activities starts in full swing after the monsoon.2008 Olympics in China and Commonwealth Games in Delhi, will further add to the demand. Besides China is the lowest margin player in the world market, the sustainaibility of which remains a question mark!!! Also, if China Revaluates Yuan its steel might lose some of its competitive pricing in term of exports. These days China earns huge foreign exchanges ( Read Dollar) by artificially pegging the Yuan against dolllar. US is forcing China to take a fresh look at its Yuan, in order to lower the trade deficit with China. If Yuan is further revalued, which is artificially pegged against the dollar, Indian Textile and Metal Companies will benefit the most. Moreover the demand for the Steel will grow due to huge construction activitiesd going on in, Beijing, Guangzhou, Shanghai, Tianjin, Lanzhou and other major Chinese cities. They will need more of Zinc and Steel to carry forward their construction activities. Since China will soon close down the unviable mills and hence the net production will go down shortly. With only 16 % increase in capacity in China, recently, the world steel market Cannot remain depressed for too long, with giants like Tata Steel or SAIL, BHP Billiton [the world's largest mining company ], Mittal Steel, or Severstal, ruling the world with full steam. This prompted, Mr. Mordashov [Russian steel company, Severstal, is controlled by this billionaire--- Alexei Mordashov] to say "We very heavily underestimate the steel industry," . "We are probably at the beginning of a new cycle of the world economy, with the development of China and India and Brazil and Russia." We are on a commodity supercycle, and this temporary drop in prices, in China will not last long. Besides the domestic demand for steel will contnue to rise due to government's stress on Infrastructure. Yesterday Monnet Ispat came out with wonderful set of numbers considering sequentially. It beat the market expectations by miles. So keep holding Monnet Ispat for time being or can enter at this price. TISCO and SAIL also should do well. Today also Selan Exploration Technology Ltd is doing well. The company will come up with wonderful set of numbers on 31st July, 2006, due to buoyancy in the Crude Oil sector. So keep increasing your holdings in the counter. But avoid the oil marketing companies like BPCL, HPCL, Essar Oil, IOC etc. The coal importing company Chandra Prabhu International Ltd is also expected to come up with good set of numbers, but since the last quarter was offseason for the company, we might not see too much fireworks on the result sheet. But due to rise in Coal prices the following quarter results will superb. Also it is into trading of petro-derivatives and rubber, the prices of which is shooting over the roof. So you can all increase your holdings in the counter. THE MARKETS WILL CLOSE IN THE GREEN TODAY----be assured of that, as there is no marked negatives in the market, except the rise in crude oil price. Best wishes, Suman Mukherjee India. http://finance.groups.yahoo.com/group/SumanSpeaks