After Goldman Sachs (NYSE:GS) analyst Sal Tharani upgraded AK Steel (NYSE:AKS) from "Neutral" to "Buy," the stock soared.
The reasoning behind the upgrade was the continuing drop in the price of iron ore, which in the mid-term should help the company's share price.
The difference between AK Steel and its competitors is AK buys iron ore, while others who own their own mining projects suffer from the lower prices, giving AK an upper hand while that situation lasts.
In the short term, this may not be that important, but over time it will definitely be a plus for AK, according to Tharani. He added that the very profitable specialty steel segment isn't reflected in AK's share price, another reason for the upgrade.
Spot iron ore prices in China have plunged 35 percent since April 2010.
Showing posts with label Spot Iron Ore Prices. Show all posts
Showing posts with label Spot Iron Ore Prices. Show all posts
Thursday, July 15, 2010
Tuesday, April 20, 2010
AK Steel (NYSE:AKS) Iron Ore Price Warning
After a warning from AK Steel (NYSE:AKS) on the potential negative impact of iron ore prices on their second-quarter resulst, the shares quickly dropped 6 percent on the guidance.
AK Steel qualified the statement by saying they're referring to if the price of iron ore exceeds the current 30 percent iron ore price increase assumed by the company.
Much of this stems from a global iron ore price not being set at this time for 2010, and until that happens, there is no way of knowing what the earnings of the company will be for the quarter.
“While AK Steel only buys a small amount of their iron priced to global, there is a formula for the rest that is loosely based on the global price,” said Michelle Applebaum, head of a steel-research firm in Highland Park, Illinois.”
This is typical of how this earnings season is going, as investors are looking at guidance more than the numbers reported because of the terrible year last year, which in many cases can make the results appear better than they really are when contrasted with the year before.
So even though AK Steel improved from their $73.4 million loss from last year during the same quarter, posting earnings of $1.9 million or 2 cents a share, over the loss of 67 cents a share last year, investors want to know what the company sees going forward, and what they see doesn't inspire a lot of confidence at this point, although it still has to play out before we know for sure.
AK Steel qualified the statement by saying they're referring to if the price of iron ore exceeds the current 30 percent iron ore price increase assumed by the company.
Much of this stems from a global iron ore price not being set at this time for 2010, and until that happens, there is no way of knowing what the earnings of the company will be for the quarter.
“While AK Steel only buys a small amount of their iron priced to global, there is a formula for the rest that is loosely based on the global price,” said Michelle Applebaum, head of a steel-research firm in Highland Park, Illinois.”
This is typical of how this earnings season is going, as investors are looking at guidance more than the numbers reported because of the terrible year last year, which in many cases can make the results appear better than they really are when contrasted with the year before.
So even though AK Steel improved from their $73.4 million loss from last year during the same quarter, posting earnings of $1.9 million or 2 cents a share, over the loss of 67 cents a share last year, investors want to know what the company sees going forward, and what they see doesn't inspire a lot of confidence at this point, although it still has to play out before we know for sure.
Friday, April 9, 2010
Rio Tinto (ASE:RIO) Now Doing Quarterly Iron Ore Contracts
Rio joins competitors in quarterly iron ore contracts
Joining its major competitors Vale (NYSE:VALE) BHP Billiton (ASE:BHP), Rio Tinto (ASE:RIO) announced it'll be dropping the annual iron ore contracts for quarterly one, which will better reflect current iron ore prices.
Now that the major three iron ore providers have changed to the quarterly contracts, the rest of the industry is expected to follow in their footsteps.
While most felt this was going to happen, as late as yesterday Rio had asserted they would be more than willing to offer benchmark pricing, or a mixture of benchmark and short-term pricing contracts.
With their major competitors abandoning the annual contracts, Rio could have been at an extraordinary disadvantage if pricing worked against them, which it more than likely would have.
Joining its major competitors Vale (NYSE:VALE) BHP Billiton (ASE:BHP), Rio Tinto (ASE:RIO) announced it'll be dropping the annual iron ore contracts for quarterly one, which will better reflect current iron ore prices.
Now that the major three iron ore providers have changed to the quarterly contracts, the rest of the industry is expected to follow in their footsteps.
While most felt this was going to happen, as late as yesterday Rio had asserted they would be more than willing to offer benchmark pricing, or a mixture of benchmark and short-term pricing contracts.
With their major competitors abandoning the annual contracts, Rio could have been at an extraordinary disadvantage if pricing worked against them, which it more than likely would have.
Wednesday, April 7, 2010
Is DryShips (NASDAQ:DRYS) Ready to Run Again?
DryShips ready to surge
For those who invested in or closely watched DryShips (NASDAQ:DRYS) in 2006 and 2007 when they went from $9 a share up to an extraordinary $130 a share in a short two-year period, may want to watch the company again, as they're signaling the possibility of another run, although highly unlikely like the one in the past.
One uncertainty either way is how the recent iron ore deal, where the iron ore industry changed from an annual to a quarterly contract, will affect DryShips and other transporters, especially in relationship to the spot price.
Another unknown is how the company share price will respond now that they've worked hard to build a foundation which seems to be fixed between $4.50 and $6.50 a share.
From there investors should be able to guage a little better than the past how the stock will perform, and what strategy they want to employ going forward.
For those who invested in or closely watched DryShips (NASDAQ:DRYS) in 2006 and 2007 when they went from $9 a share up to an extraordinary $130 a share in a short two-year period, may want to watch the company again, as they're signaling the possibility of another run, although highly unlikely like the one in the past.
One uncertainty either way is how the recent iron ore deal, where the iron ore industry changed from an annual to a quarterly contract, will affect DryShips and other transporters, especially in relationship to the spot price.
Another unknown is how the company share price will respond now that they've worked hard to build a foundation which seems to be fixed between $4.50 and $6.50 a share.
From there investors should be able to guage a little better than the past how the stock will perform, and what strategy they want to employ going forward.
Friday, April 2, 2010
Goldman Sachs (NYSE:GS) Vale (NYSE:VALE) Price Deals
Vale SA Quarterly Pricing Agreements
Goldman Sachs (NYSE:GS) said Vale SA (NYSE:VALE) has agreements in place for 97 percent of its clients around the world concerning the new quartely pricing system now being adopted by the industry.
In regulatory filing yesterday Vale said over 90 percent of their iron ore contracts have been covered.
Major competitors BHP Billiton Ltd. (ASE:BHP) and Rio Tinto Group (ASE:RIO) are moving toward the same pricing format as well with their iron ore and coking coal clients.
The iron ore market generates about $200 billion in business annually.
Goldman Sachs (NYSE:GS) said Vale SA (NYSE:VALE) has agreements in place for 97 percent of its clients around the world concerning the new quartely pricing system now being adopted by the industry.
In regulatory filing yesterday Vale said over 90 percent of their iron ore contracts have been covered.
Major competitors BHP Billiton Ltd. (ASE:BHP) and Rio Tinto Group (ASE:RIO) are moving toward the same pricing format as well with their iron ore and coking coal clients.
The iron ore market generates about $200 billion in business annually.
Wednesday, March 31, 2010
India Likes Vale (NYSE:VALE), BHP Billiton (ASE:BHP) and Rio Tinto (ASE:RIO) Quarterly Contracts
India Companies Support Iron Ore Quarterly Contracts
Indian companies such as Sesa Goa and NMDC like what they see with the change in iron ore contracts with Vale (NYSE:VALE), BHP Billiton (ASE:BHP) and Rio Tinto (ASE:RIO), from an annual to a quarterly basis, and so do investors, as shares in the companies rose with the news this is going to be the new way of doing business with iron ore contracts and pricing, reflecting a more accurate measure of the market than the annual pricing couldn't do.
Exporters like this because it decreases the difference in price between spot and contract prices, and allows them to participate in profits depending on the movement of prices.
Annual contracts interfered with that and forced companies to operate within the parameters of the agreed upon price, no matter how it impacted their margins and earnings.
Indian companies such as Sesa Goa and NMDC like what they see with the change in iron ore contracts with Vale (NYSE:VALE), BHP Billiton (ASE:BHP) and Rio Tinto (ASE:RIO), from an annual to a quarterly basis, and so do investors, as shares in the companies rose with the news this is going to be the new way of doing business with iron ore contracts and pricing, reflecting a more accurate measure of the market than the annual pricing couldn't do.
Exporters like this because it decreases the difference in price between spot and contract prices, and allows them to participate in profits depending on the movement of prices.
Annual contracts interfered with that and forced companies to operate within the parameters of the agreed upon price, no matter how it impacted their margins and earnings.
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