UBS = GLOBAL STEEL MARKET WATCH – REMAIN CAUTIOUS
=> China's steel mills to limit global steel recovery in our view, it is not yet time to buy global steel stocks, especially those from Europe, South Korea or China.
=> We see risks accumulating with China being the single biggest threat, given the slowdown in demand and negative implications for global steel pricing.
=> On our calculations, Chinese steel companies are, unsurprisingly, likely to have the highest earnings sensitivity to a more environmentally restrictive scenario, especially Maanshan (Neutral, PT Rmb1.70) and Wuhan Steel (not covered).
=> However, steel price sensitive stocks such as ArcelorMittal (Sell, PT $14/€10.5) and CSN (Sell, PT R$8.5), or steel traders such as Kloeckner (Sell, PT €7), could be hit particularly hard.