Sector oversold, be prepared for a
potentially fierce bear market rebound
􀀗 We expect a powerful set of 2Q results
to trigger substantial earnings upgrades
􀀗 Reiterate OW(V) ex-China plays, and
OW(V) Maanshan-H; upgrade NSC to
OW(V) from N(V) and Baosteel to N(V)
from UW(V)
Earnings momentum positive, stable margins in 2009.
We’re now in ‘bear’ territory, a market where momentum is
king and valuations tend to be ignored. While the most
powerful steel price cycle in history appears to be losing
strength, we believe earnings momentum will soon take off.
We forecast a 3Q08 peak in steel prices but expect prices to
remain at elevated levels, given continuing capacity
constraints and firm underlying demand, particularly from
emerging economies. Looking forward, elevated steel prices
coupled with our forecast of lower iron ore and coal prices,
should see high profit margins maintained into 2009. In
short, we see greater tightness in steel than in raw materials.
Catalysts – 2Q results, 4Q hikes, capital management.
We expect upcoming 2Q results to trigger substantial
consensus upgrades. Our updated earnings forecasts see us
ahead of consensus estimates by +23%. What’s more, we
believe 3Q results will be even better. Given the lagged
nature of quarterly contract pricing, 4Q contract price hikes
are also likely. Finally, armed with strong balance sheets, we
believe capital management initiatives are likely.
Earnings and ratings upgrades. We remain positive on the
Asian Steel sector. Reiterate Overweight (V) ex-China plays,
and upgrade Nippon Steel to Overweight (V) and Baosteel
to Neutral (V).

目录

Investment summary 3
Prices, supply & demand 15
Company summaries 20
POSCO – Towards
sustainable growth 21
Nippon Steel –high end
leverage 26
JFE Holdings – High end,
export drive 30
Baosteel – China’s steel
leader 34
China Steel – Yield and now
growth 39
Angang – Expansion awaiting 43
Maanshan – the stars have
aligned 48
BlueScope – Likely entry to
the billion dollar club 52
Regional steel statistics 56
Notes 79
Disclosure appendix 80
Disclaimer 83
Contents