It's not hard to find a steel company that looks undervalued on the
basis of past cycles today, but there's a very real question now as to
whether the large global players like ArcelorMittal (NYSE:MT) and POSCO (NYSE:PKX)
will see the same sort of upturns as in the past given the increasing
size and influence of Chinese mills. Relative to ArcelorMittal, POSCO is
more leveraged to growing markets (relatively little of its exports go
to North America or Western Europe) and the company can still benefit
from a more lucrative mix and lower-cost production technologies.
I was much too early in liking POSCO a year ago,
as pretty much the entire steel sector has continued to underperform on
mediocre demand growth and increasing Chinese exports. Although I do
believe it will be difficult for POSCO to achieve the sort of growth and
margins it has seen in past upturns, I think valuation is looking
pretty washed out at today's price.
Follow this link for more:
POSCO Another 'Wait And See' Story
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