Credit Suisse US steel analysts have reduced hot rolled coil (HRC) and steel spread assumptions citing planned capacity additions, declining US steel tariff protection and the likely rise in scrap.
More HRC will enter the market in the second half of 2019 and the new capacity materially exceeds the most ambitious growth forecasts, in the broker’s view.
This will force the closure of high-cost capacity. BlueScope’s multiple geographic and end-market exposure as well as low steel production costs does reduce earnings volatility, the broker assesses.
Outperform and $16.50 target retained.
Target price is $16.50.Current Price is $11.73. Difference: $4.77 – (brackets indicate current price is over target). If BSL meets the Credit Suisse target it will return approximately 29% (excluding dividends, fees and charges – negative figures indicate an expected loss).