Good Times Still Rolling For Steel

By Tonya Vinas Several recent indicators put the U.S. steel industry in a positive light for 2005 performance. Most recently, two events put Mittal Steel Group closer to its plan to become the world's largest steel producer. Although Mittal is based in the UK, it is poised to have extensive steel holdings in the U.S. On Dec. 21, Cleveland, Ohio-based International Steel Group announced that it received an early termination of a waiting period required under anti-trust laws and now must only receive shareholder approval to merge with Mittal. It's expected the deal will close in the first quarter of 2005. Mittal Steel officially formed Dec. 17 with the merger of Ispat International NV and LNM Holdings NV, the respective public and private steel assets held by the Mittal family. Meanwhile, Pittsburgh-based U.S. Steel, which will be one of Mittal's largest North American-headquartered rivals, received a positive revision of its expected performance from MorganStanley's North American equity research unit. In a Dec. 6 report, the advisers set a $60-per-share price target for the company, revised from $49; boosted their earnings-per-shared estimate to $8 from $7.09; and said U.S. Steel's "business model is the best it has been in 30 years, and we look for it to end [2006] with approximately $1.2 billion in net cash." Finally, while the spot steel market has moderated a bit, prices are still in the desirable range for integrated producers, while scrap prices are falling, which is good for mini-mills.

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