Can A Better Second Half Drive Some Enthusiasm For ArcelorMittal?

My concerns back in the late spring about it being too late in the cycle to make good returns in steel sector appear to have played out this summer. ArcelorMittal (MT) has declined more than 10% since my last update on the company, despite a stronger-than-expected second quarter and a stronger outlook for the second half. What's more, steel prices have held up, as has demand, and spreads are still attractive. It's not just ArcelorMittal, though, as Voestalpine (OTCPK:VLPNY), U.S. Steel (X), Ternium (TX), Steel Dynamics (STLD), and Nucor (NUE) are down over that period as well, and Acerinox (OTCPK:ANIOY) is barely up.

ArcelorMittal looks very cheap on the basis of near-term EBITDA, and even looking a few years ahead to declining prices and profits suggests that today's valuation is weak relative to historical norms. At this point, I'm not really sure what's going to bring investors back to this name, as steel prices aren't likely to improve much (if at all) from here, and investors tend to bail when pricing momentum fades. So, while I do think ArcelorMittal looks unfairly cheap, the markets don't care about fair, and investors considering these shares need to be aware of the risk that this is a value trap.

Continue here:
Can A Better Second Half Drive Some Enthusiasm For ArcelorMittal?