Outside of the argument that robust U.S. auto demand at present is driving domestic U.S. steel demand, this remains among the more “farfetched” theories in our view. Why? Well, first, when considering U.S. HRC spot prices are sitting at a +$93/mt, +$63/mt, & +$18/mt premium to Chinese, EU, and Turkey HRC spot prices (vs. deficits of -$14/mt, -$47/mt, & -$27/mt when looking at the 5yr avg.), by definition, if these countries were dumping U.S. HRC spot prices would not be trading at the current premiums exhibited in the market. Thus, while we acknowledge trade restriction cases are “hot” at present, we find it very difficult to imagine U.S. steel mills successfully arguing that dumping is occurring against the current macro backdrop.
We continue to believe the rally in US Steel is based on a number of mis-perceptions on the market. We see it as among the top short ideas in our coverage universe though year-end 2014, and into 2015.
Source: blogs.barrons.com
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