SGM – Credit Suisse rates the stock as Outperform

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The re-starting of US blast furnace capacity has caused a slump in US steel prices and put the steel market into surplus, constraining the price that US EAF steelmakers can pay for scrap. Recent tariff reductions have made this worse.

The elimination of Mexican & Canadian steel tariffs also means US steel imports are likely to increase. In the medium term, 14mt of planned, low-cost US steel capacity additions by 2022, requiring US-generated scrap, may threaten Sims Metal’s US business, Credit Suisse points out.

Outperform rating and $12.90 target maintained.

Sector: Materials.

Target price is $12.90.Current Price is $9.86. Difference: $3.04 – (brackets indicate current price is over target). If SGM meets the Credit Suisse target it will return approximately 24% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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