Publish date:

Catch a Recovering Steel Stock

ArcelorMittal, Steel Dynamics and POSCO are poised to recover from the recent selloffs to provide investors attractive gains.

NEW YORK (TheStreet) - ArcelorMittal (MT) - Get ArcelorMittal SA ADR Report, Steel Dynamics (STLD) - Get Steel Dynamics, Inc. Report and POSCO (PKX) - Get POSCO Sponsored ADR Report provide attractive buying opportunities at their current stock prices.

In addition to trading around 52-week lows, stocks of ArcelorMittal, Steel Dynamics and POSCO offer attractive P/E multiples of 9.6, 10.4 and 9.7, respectively. In comparison, U.S. steel majors,

U.S. Steel

(X) - Get United States Steel Corporation Report


AK Steel

(AKS) - Get AK Steel Holding Corporation Report



(NUE) - Get Nucor Corporation Report

are trading at P/E multiples of 20.1, 14.3 and 25.6, respectively.

We believe that steel selloffs, on concerns related to Europe's debt crisis during the past month, are overdone. Even though capacity utilization rates reported by the American Iron and Steel Institute on May 24 and May 31 declined to 73.9% and 73%, respectively, the rate reported on June 7 increased back to 73.8%.

ArcelorMittal, Steel Dynamics and POSCO capitulated 21.2%, 12.0% and 5.0% of their respective market values during the past month. In comparison, U.S. Steel, AK Steel and Nucor declined 22.8%, 18.3% and 10.6% during the same period. Nucor,

being the leading steel company by dividend yield

, declined less.

Other steel producers


TheStreet Recommends

(TX) - Get Ternium S.A. Sponsored ADR Report



(MTL) - Get Mechel PAO Sponsored ADR Report


Worthington Industries

(WOR) - Get Worthington Industries, Inc. Report

were down 11.8%, 8.8% and 12.6% in the past month, respectively.

ArcelorMittal, a vertically integrated company, benefits from the advantage of access to raw materials and a substantial exposure to emerging steel markets. The company is 45% self sufficient in iron ore and 15% self sufficient in coking coal, at an operating capacity of 100%. Anticipating to operate at 75% of capacity in 2010, ArcelorMittal will turn more self-sufficient in iron ore and coking coal. The management is targeting to reach 75% self-sufficiency in iron ore by 2015.

European machinery and auto component manufacturers will gain from a weak euro and witness improved export demand for their products. This scenario will benefit ArcelorMittal, which is set to increase the prices of its products for the third quarter. Currently, the stock has five buy, three hold, and no sell ratings, according to


Analyst ratings guide.

Steel Dynamics will likely benefit from the strength in the flat-roll and scrap markets, compared to the strength in structural steel and rebar, as well as in fabricated products. The company anticipates a stable and positive outlook for 2010. The stock has an attractive 11 buy, no hold and no sell ratings, according to


Analyst ratings guide.

POSCO will be better placed with a number of initiatives taken so far this year to expand steel production in the emerging markets, such as the recent six million tons per annum expansion plan in India. The stock has four buy, seven hold and one sell rating, according to


Analyst ratings guide.