A Strong U.S. Market Can Support A Higher Price For Acerinox

Acerinox (OTCPK:ANIOY) hasn’t done as well as I’d expected since my January write-up, but it has been a relatively good house in a bad neighborhood, as stainless steel peers like Aperam (OTC:APEMY) and Outokumpu (OTCPK:OUTKY) have been considerably weaker, as have many other steel companies like ArcelorMittal (MT), Nucor (NUE), voestalpine (OTCPK:VLPNY) as investors worry about whether the cycle is peaking.

I regard Acerinox as a “rental”, not a long-term buy, with the company strongly leveraged to higher stainless prices in the U.S. (where it has around 35% to 40% share) but also vulnerable to lower prices in Europe and protectionist policies that could hurt its facilities in South Africa and Malaysia. Although I think there is still 10% to 15% potential from here, and possibly more if the cycle has longer legs, the long-term return potential is not all that appealing and investors often bail on these stocks when pricing momentum fades.

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A Strong U.S. Market Can Support A Higher Price For Acerinox