As indicated in the accompanying graphic, there's been a strong correlation since 1997 between WSD's "Global Steel Finance" composite performance of steel equities and the hot-rolled band export price. The hot-rolled band export price is a key indicator since: a) most of the major steel companies in the world are steel sheet producers, with hot-rolled band being the key "substrate" for non-HRB products; and b) the HRB export price, with leads and lags home-market prices depending on the country and conditions in place at that time, usually takes into account the steel mills' operating cost due to changes in the prices of iron ore, coking coal and steel scrap.
As indicated, the WSD Steel Group Stock Price Index of steel mill common stocks in 2003-2004 lagged the HRB price; in 2007-2008, it well preceded it; and, since the summer of 2008, has often moved in line with it - although, in 2013, the stock price index had a sharp rally when the export price was about flat.
Currently, WSD thinks that the HRB world export price is close to bottoming because, on an ex-works basis, it's well below the marginal cost of many steel mills - except for steel mills in countries with ultra-low operating costs in part due to currency devaluations.
Our composite stock price index consists of un-weighted price index for the common stocks of 54 steel companies in sixteen countries from eight different regions. As noted, the index was set to equal to 100 as of January 1997. In general, the HRB export price is 2.4 times more volatile than the common stock index.
This report includes forward-looking statements that are based on current expectations about future events and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict. Although we believe that the expectations reflected in our forward-looking statements are reasonable, they can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including among other things, changes in prices, shifts in demand, variations in supply, movements in international currency, developments in technology, actions by governments and/or other factors.
The information contained in this report is based upon or derived from sources that are believed to be reliable; however, no representation is made that such information is accurate or complete in all material respects, and reliance upon such information as the basis for taking any action is neither authorized nor warranted. WSD does not solicit, and avoids receiving, non-public material information from its clients and contacts in the course of its business. The information that we publish in our reports and communicate to our clients is not based on material non-public information.
The officers, directors, employees or stockholders of World Steel Dynamics Inc. do not directly or indirectly hold securities of, or that are related to, one or more of the companies that are referred to herein. World Steel Dynamics Inc. may act as a consultant to, and/or sell its subscription services to, one or more of the companies mentioned in this report.
Copyright 2015 by World Steel Dynamics Inc. all rights reserved