With supply still down relative to pre-pandemic levels and a strong demand recovery underway, North and South American steelmakers continue to enjoy exceptional price strength. The good times won't last for Ternium (TX), but stronger demand across its Latin American markets can offset some of the oncoming price weakness, and weaker volumes out of China could perhaps support prices at a higher-for-longer level than bears believe.
I've liked Ternium for a while (it's been my preferred steel pick), and with a 45% total return since my last update for Seeking Alpha - matching Cleveland-Cliffs (CLF) and Nucor (NUE) and outperforming ArcelorMittal (MT), Gerdau (GGB), Steel Dynamics (STLD), I don't regret that call at all.
At this point, I do still see some upside in the shares, and I think 2022 will still be a strong year for pricing and volume, but Gerdau is maybe more interesting on a risk/reward basis. Still, I think holding steel stocks into a down-cycle isn't the best idea, and while I can see growth drivers for Ternium beyond 2022 and I believe it's both well-run and undervalued, that cycle sentiment risk is a growing concern for me.
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Ternium Leveraging A Steel Supply Imbalance, With Demand Growth Opportunities Coming Later
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