JPM bearish on European carbon steel, stocks slump amid sinking markets

Kloeckner & Co SE

28/09/2022 09:43

** J.P.Morgan notes lower prices and higher costs are
eroding margins for European carbon steel, with plate steel
being an exception thanks to resilient prices and relatively
stronger end-markets
    ** Shipments will remain tepid on weak end-demand, it adds
    ** It reinstates coverage of Thyssenkrupp  TKAG.DE  with
"underweight", saying stock trades at an "unjustifiable" premium
to peers, given high exposure to automotive and consequent
near-term risk to shipment volumes and/or prices
    ** It stays "underweight" on Voestalpine  VOES.VI ,
Salzgitter  SZGG.DE , which are part of its negative catalyst
watch into Q3 alongside ArcelorMittal  MT.AS , given weak
earnings and end-market dynamics
    ** "In Europe, a turning point could occur if prices can
sustainably reach a floor, but this will require resolve from
steel-makers to take (and keep) capacity off-line well into
H1'23" - JPM
    ** Shares in Thyssenkrupp drop 11%, Salzgitter and
Voestalpine sink 14% and 7%, respectively, while Kloeckner
 KCOGn.DE  and ArcelorMittal fall 10.3% and 5.5%
    ** In London, the energy  .FTNMX601010 , mining
 .FTNMX551020  sectors slid as a strengthening dollar weighed on
metal prices, while Hurricane Ian-induced supply cuts hurt crude
prices  urn:newsml:reuters.com:*:nL4N30Z1SB
 (Reporting by Linda Pasquini)
 ((Linda.pasquini@thomsonreuters.com))