Cards stacked against Iscor
EVEN though Iscor is oversold on both net asset value and short-term earnings forecasts, steel markets and fundamentals remain against the company, says BOE Securities analyst Nic Dinham. He can recommend Iscor no better than a hold.
"The principal risk is the threat of triggering antidumping or countervailing duties that will prevent exports from being sold at economic prices in the country of destination," he says.
Dinham concludes the world is going to be a lot more protectionist in the next 12 months, and South African producers could face direct trade action against exports in their most important markets.
Although Iscor is taking defensive steps, it remains the producer most exposed to antidumping action as well as to likely unfair-subsidy rulings against subsidiary Saldanha Steel.
SA has lifted steel exports as domestic demand has slackened while weaker African and Asian markets have forced a dramatic redirection of exports to Europe and America, destinations to which SA is likely to export still more in the next two years.
SA stainless steel accounts for 13% of American imports and 1.7% of total steel imports. Total imports into America have risen sharply over the past year. US prices have fallen, and the country is recording a serious increase in trade-related actions.
Dinham says most SA steel exports are technically "dumped" because, to compete internationally, its free on rail price for exports to the US and Europe are often priced below those in Gauteng.