Good times for steel sub-sector are fast slipping away, anticipating weaker 2H. We are now turning bearish on the steel sub-sector, as:
1. Prices of key steelmaking inputs, in particular, scraps and iron ore are falling and lower input prices will weigh down on steel prices;
2. Concerns on overcapacity in China has heightened; and
3. The risk on a sharper-than-expected slowdown in global economy has heightened.
This will affect buying sentiment on consumer goods (such as automobiles and electric appliances) as well as property demand, hence filtering down to steel consumption.
Building Materials : Steel Sub-sector Running Out of Steam - 26/05/2010
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