Venture: High-Tech Steel
Issue 61;
The price of steel has started rising while iron ore remains soft.
Iron Ore and Hot Rolled Steel Futures
I asked Grok (AI on X.com) why iron ore is down, and steel is up.
“Iron ore is down due to weak demand, ample supply, and a shift to scrap, while steel is up due to supply constraints, higher production costs, and regional market reactions to trade policies. These diverging trends highlight the complex interplay between raw materials and finished goods in the global steel industry.”
I then looked at steel stocks and was surprised by the extent of the current divergence. US steel stocks have recently eased back but are way ahead of both Asia and Europe, which have lagged significantly.
Regional Steel Companies
Looking at the price-to-sales ratios, the US companies are trading at 1x sales, Asia Pacific at 0.55x and European companies at under 0.4x. You could say that European steel companies have a structural discount, likely due to higher energy costs and regulation, but the gap is wide.
Regional Steel Companies Price-to-Sales Ratio
I would add that the political landscape is changing in Europe. Mario Draghi, the former European Central Bank President, wrote a long overdue report on European competitiveness, which outlines how the block needs to up its game.
This note covers a high-tech European steel business that is not only debt-free and profitable but sits on a cash pile greater than its market cap. Not only that, but it is also a global leader in the refined steel industry, with roots dating back to 1914. The recent jump in steel prices could provide the catalyst for a revaluation. This is another free equity with a great business thrown in for nothing.
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