Search

The steel (integrated) industry which consists of companies that produce carbon steel using iron ore and coke is faltering. The US economy is slowing down and this industry is not good to invest in in mid-1998. It is important to consider this industry from a long term perspective. USX-US Steel Group would be a good investment when the industry recovers.

The economy during 1998 will be more moderate than it was during 1997 when it grew at a rapid pace, but the integrated steel industry is expected to remain strong. An improving price structure, strong sales and orders are factors that will keep the industry looking good during the year, despite the rise in imported steel. However, undervaluation continues, despite the strength that the industry has shown.

The integrated steel industry usually reflects US economic conditions, and the US economy is expected to remain sound in 1998 with a GDP growth rate of 2% to 2.5% and low inflation aiding expansion. Capacity, productivity, and costs are expected to improve in 1998, and there should be some demand growth in the industry. Gains for the industry are expected worldwide for the next three to five years, although these stocks are untimely for 1998.

Bookings, shipments, operating levels, and pricing for the integrated steel industry have remained favorable with the US economic expansion during the 1990s. This is not expected to change in 1997 and 1998, as steel capacity is has increased along with market competition, and the industry is expected to be stronger in the long term, as well. Investors will find attractive stocks in this industry, such as the USX-US Steel Group, in 1997 and 1998.

The integrated steel industry continues to have a good year during 1997, with solid 2nd qtr earnings and a stronger economy to back it up. Strong demand for steel has boosted profits, which have also been enhanced by increased productivity and better prices. However, companies still operate with a small error margin and industry capacity is increasing, which may impact the long-range earnings of integrated steel firms. Investors interested in this industry will find some opportunity for long-range profits.

Companies in the integrated steel industry have experienced a partial price recovery due to the solid economy, which has alarmed investors who fear that increased business activities will result in inflation and rising interest rates. Analysts expect the integrated steel industry to continue its earnings trend in 1998, but the gains will be selective. Although the integrated steel industry has been deemed out-of-favor, it appears undervalued.

The steel (integrated) industry is expected to grow moderately during 1997, as demand for steel continues to be high. However, profits will not be as high as expected, due to soft pricing and unattractive supply contracts. Steel firms are also focused on international expansion and will face high expenses to support this goal. Investors looking for growth in stocks over a three year to five year period will find some attractive securities.

There should be some pressure on corporate profit margins with slower growth in the US economy during 1997. However, volume and other basics remain strong for the steel industry through the 4th qtr of 1996, and are not expected to change in 1997. Streamlining and productivity increases are also making US mini-mills competitive with the international industry. The steel industry is untimely for 1996 and 1997, but these stocks are expected to improve.

Weak prices and strong volume continue in the integrated steel industry during 1996. Plant outages and market share competition have also had an effect on the industry. Capacity is expected to expand in 1997 to meet global demands. Long term prospects in 1999-2001 look better than the short term prospects.

The steel industry appears to have established itself into a stable economic condition with consistent, although modest, economic growth continuing in both the short-term and long-term periods. Unlike the 1980s, the steel industry has raised production and cut costs to become profitable, even though prices have remained low. Sophisticated investors can obtain benefits from short-term investments but the less experienced should use steel industry securities for long-term investments.

The steel industry may find economic growth becoming somewhat more difficult as the national economy has begun to slow down the dramatic increases recorded in the summer and fall of 1995. However, a further lowering of interest rates and the industry's policy of clearing capital debts indicate that major steel industries will show increased profits in 1996. The steel industry's security prices appear to be a good area for long-term investment but the cyclical nature of the industry's economic results should deter even patient investors.

Operating patterns in the steel industry are still level at 85% to 90% of capacity. Greater US and overseas competition, and lower prices and sales, made 3rd qtr 1995 earnings disappointing. Newer equipment, more realistic labor policies, and cutbacks are making the US industry more competitive globally, however. Steel industry stocks are positive for the next three to five years with a healthy economy.

The steel industry is expected to grow during the 2nd half of 1995 and 1996 in spite of some weak areas. Operating rates, backlogs, and other basics remain strong and the steel industry is expected to perform slightly better than the market for the next 12 months. Stock prices for steel in 1995 are undervalued and will increase through 1998-2000. Among the better stocks are USX-U.S. Steel and Inland.

The major steel companies had higher earnings in the 1st qtr of 1995 and this will continue through 1996. Balance sheet deleveraging, increased productivity, and healthy industry basics will double earnings-per-share in 1995. Economic contraction in the US is the one risk for the steel industry in 1996. USX-U.S. Steel, Inland Steel, and Bethlehem Steel are good stocks for long-term investment positions.