POSCO Now A Passenger As Investor Sentiment On Global Steel Demand Drives The Story

Back in the pre-Covid-19 days, I thought the valuation of POSCO (PKX) shares looked disconnected from underlying fundamentals, but that the shares could “bump along the bottom” for a few more quarters as investors factored in a weaker steel outlook for 2020. Covid-19 has thrown all of that out, and although the shares have actually held up quite well versus Steel Dynamics (STLD) and Nucor (NUE), and outperformed other non-U.S. steel stocks like Gerdau (GGB) and Ternium (TX), a roughly one-third decline in the share price is still pretty brutal.

Are POSCO shares trading too cheaply against even a grim, Covid-19-influenced outlook? I think so. But I also think that it’s going to take evidence of a global economic recovery, particularly in short-cycle end-markets, and improving global steel prices to really change sentiment. In other words, with reports of apparent demand declines of 20% or more coming out of markets like Europe, it’s going to be hard for sentiment to shift, but when signs of demand stabilization start to appeal, these shares should start to recover.

Click here to continue here:
POSCO Now A Passenger As Investor Sentiment On Global Steel Demand Drives The Story