Use access key #2 to skip to page content.

Cuchulainn1 (< 20)

Perfect Storm for Steel Recyclers?

Recs

20

April 13, 2008 – Comments (16) | RELATED TICKERS: NUE , SMS , MEA

I believe that we are seeing a perfect storm for steel recyclers in the making. High commodity prices and high energy prices means greater demand for those who can recycle steel since it requires only a fraction of the energy to produce.


More importantly, a lot of the new steel mills in Asia use electric arc furnaces.  The advantage for the Asian steel mills is that the electric arc furnaces use a fraction of the energy (which is increasingly expensive) compared to smelting. This is important because all these new furnaces require scrap steel... a lot of scrap steel.


What this means is that the rise in recycled steel commodities is not SPECULATIVE. The demand is very real and is consumer driven. Those who sell recycled steel to buyers in the Asian market stand to make tremendous amounts of money.

Three companies that come to mind to play recycled steel are:

1. Nucor (NUE) 94% of caps all-stars think NUE will outperform.

2.  Metalico (MEA) a small cap. 98% of caps all-stars think MEA will outperform.

3. Sims Metal Management (SMS) midcap. With the recent merger SMS has passed Nucor as the worlds largest recycler of metal in the world (16 million tons, 220 locations on 4 continents) 100% of caps all-stars think SMS will out perform.  (However only 4 have rated)

Of the three, I like SMS the best.  I feel that their merger was a home run and now the company has a large foothold in the USA, which is the Saudi Arabia of recycled steel.

 This is a play that commodity and energy prices will remain high.  This is also a play on continued Asian economic growth.  

16 Comments – Post Your Own

#1) On April 13, 2008 at 12:43 PM, Tastylunch (99.64) wrote:

great post

Report this comment
#2) On April 13, 2008 at 2:36 PM, Cuchulainn1 (< 20) wrote:

Thank you.  Just saw that I forgot to mention a company. 

Schnitzer Steel:  (SCHN) Another recycler.  Reported an increase in profits of 26% last week and Cramer jumped on board.  Stock is up 50% on the year. 

This would also be a solid pick. 

Again I still feel SMS is the best.  Forbes listed it as one of their 10 "guru buys".  But I don't think you can go wrong with any of these companies (unless they royally screw up).

 

 

forbes:http://www.forbes.com/2008/04/02/coventry-wellpoint-fmc-pf-ii-gurus_jl_0402gurupicks_inl_slides_4.html?thisSpeed=15000 

 

Report this comment
#3) On April 13, 2008 at 2:38 PM, Tastylunch (99.64) wrote:

btw are you a fan of Irish folklore? like your screenname . :-)

 

Report this comment
#4) On April 14, 2008 at 10:17 AM, bellard (96.12) wrote:

Also CMC and MM have recycling. Was MM bought by SMS??

Report this comment
#5) On April 14, 2008 at 10:53 AM, Cuchulainn1 (< 20) wrote:

Bellard here is your answer:

http://www.zibb.com/article/2882437/Sims+merger+with+Metal+Management+takes+effect

 

In interest of full disclosure I picked up a few shares of SMS this morning on some weakness in the steel industry.  Still hoping that it drops below 30 before I buy the rest.   

Report this comment
#6) On April 16, 2008 at 2:48 PM, madcowmonkey (< 20) wrote:

You are getting plenty of recs for your sms call. You definitely make a strong case for the recycling companies. I am interested in seeing how many all star caps are now rating sms? Nice post, keep it up.

Report this comment
#7) On April 16, 2008 at 2:55 PM, madcowmonkey (< 20) wrote:

Wow? You were commenting on my blog while I was commenting on yours:) I have been in and out of caps all day, so I guess it was pretty good probability. What was Cramer ranting about anyway? Something about quid and 20 years? 

 

Report this comment
#8) On April 16, 2008 at 4:18 PM, Cuchulainn1 (< 20) wrote:

Thanks MadCow.  That was an interesting article.  As for SMS, it's always nice to get in before 5% jump.  I feel that ALL STEEL recyclers are going to do well.  If a rising tide lifts all boats, why not get in the biggest boat?

That is my rationale for Simms. ( Shnitzer did outperfrom Simms today 5.86% vs 5.6%)

Report this comment
#9) On April 17, 2008 at 12:39 PM, FleaBagger (99.16) wrote:

11 more All Stars have rated SMS an outperform since you wrote your article, and several of them are faves of mine. I guess I'll just follow the All Star crowd on this one. Thanks for the article. I think I'll take a closer look at MEA, too.

Report this comment
#10) On April 17, 2008 at 1:14 PM, Cuchulainn1 (< 20) wrote:

Fleabagger, MEA may be a takeover target for Nuecor.  Be careful about your timing if you decide to buy.  MEA has rallied 20% this week on the takeover speculation.  If you buy here and the takeover does not happen. 

Look out below! 

Report this comment
#11) On April 17, 2008 at 4:41 PM, madcowmonkey (< 20) wrote:

Man? When fleabagger says he is going to take a look he is serious. Volume just shot up. sounds like others are whispering behind closed doors.

Report this comment
#12) On April 18, 2008 at 7:36 AM, admiral19 (< 20) wrote:

I have been looking for a good steel play.  You make a compelling case for recylers.  I am going to check it out.  thanks

Report this comment
#13) On April 21, 2008 at 2:37 PM, Tastylunch (99.64) wrote:

hey you made the frontpage of CAPS . congrats!

Report this comment
#14) On April 21, 2008 at 4:30 PM, Cuchulainn1 (< 20) wrote:

Thanks TL.  I appreciate it.

 

 

Report this comment
#15) On April 21, 2008 at 6:56 PM, DarkToast (98.66) wrote:

Why did you drop MEA today?

 

Report this comment
#16) On April 23, 2008 at 9:11 AM, Cuchulainn1 (< 20) wrote:

Dropped MEA from caps just because I felt it was due for some profit taking.  Nothing wrong with the company or the industry from what I can tell. 

Report this comment

Blog Archive

2008
April (1)

Featured Broker Partners