Steel Price Tracker:Steel prices continue to rise -South closes gap to Northern European prices

Strong steel price momentum with scope for further margin expansion.

    Equities remain priced for a margin contraction (vs. spot). However, as discussedin our European Steel Outlook 2018, we see several reasons (high global pricelevels, protectionism, demand and consolidation) why margins may continueto stick or even expand further (which would imply further significant earningsupgrades across the space). Our top picks are: 1) ArcelorMittal, which looksattractive to us based on strong cash flow (9-11% FCF yield), valuation andadditional upside optionality; and 2) Voestalpine, which we believe has more roomfor upgrades, generates strong underlying CF (8-9% FCF yield) and has a lessvolatile business model.

    HRC: S. European prices up E13.

    Last week, S. European prices were up by E13 to E540 (up USD21 to USD667)and N. European prices were also up by E2 to E550 (up by USD7 to USD678).

    Prices have risen E10 in the past three months and several European players stilltry to push for further price rises.

    US HRC prices up USD4; Chinese export prices up USD7.

    US HRC prices were up USD4 last week and plyers push for more increases. Theprice differential with China decreased to USD192/t. Chinese HRC prices were upby USD7 to USD575. The spread between Chinese and S. European prices roseto USD92, above than two-year average spread of USD59, with Chinese pricesdown E2 (up in USD terms to USD30) in the last three months.

    Plate: S. European prices up E13; US prices up by USD9.

    S. European prices were up E13 to E569 (up USD21 to USD701). Prices rose E19 inthe past month. N. European prices were up by E5 to E599 (up USD11 to USD738).

    US prices were up by USD9 to USD860 (up E2 to E697).

    Iron ore: Fines 62% Fe prices down USD1/dmt; coking coal: prices down USD2.

    The price of Fines 62% were down by USD1 WoW to USD74/dmt. Chinese steeloutput increased 0.4% WoW to 1.79mt/day in the first ten days of January. Pricesof premium coking coal (Australian exports) decreased by USD2 to USD214 lastweek. They were down by E2 to E173.

    Scrap: European prices down USD7.

    European prices were down by USD7 to USD338/t, while Turkish prices weredown USD10 to USD356/t last week. If current prices were to remain stable untilend-Q1, the QoQ price increase for European scrap in Q1 would be USD31.