Steel stocks poised to move up

In the March 31st issue of The Edge newsletter, you will read an article entitled 'GK Goh buying local steel stocks'. It was reported that GK Goh has acquired 5.3% of Lion Industries during the recent market selldown. In addition, it was reported that GK Goh has acquired Kinsteel shares but the shareholding has not reached the 5% level which required disclosure.

In February, The Edge has reported steel millers has increased the prices of their products by some 20% as a result of a 65%-increase in the prices of iron ore (go here). In January, it has reported that local manufacturers may benefit higher tax structure being implemented by the Chinese authorities in order to discourage steel dumping by Chinese manufacturers (go here).

From the table below, you can see that the price of Composite Carbon Steel in Asia was USD764 per tonne as at March 2008, compared to USD547 per tonne as at March 2007 & USD469 per tonne as at March 2006.


Table: Global Steel Prices from Feb-06 to Mar-08 (source: MEPS International Ltd)


Graph: Steel Prices & Index (Asia) (source: MEPS International Ltd)

In the US, the DJ US Steel Index has broken above its strong horizontal resistance at the 440 level in March. The past 6 days, this index has risen from 440 level to hit a high of 496 on April 7th, before closing at 482. Yesterday, it gained 1.26% to close at 489.


Chart 1: DJUSST's daily chart as at April 8th (source: Stockcharts.com)

On the local bourse, you can consider buying anyone of the steel manufacturers, such as LionInd, Kinsteel, Onasteel, Masteel & AnnJoo. My preference is for AnnJoo & Masteel, as both stocks are currently trading near their respective uptrend line.


Chart 2: AnnJoo's daily chart as at April 8, 2008 (courtesy of Quickcharts)



Chart 3: Masteel's daily chart as at April 8, 2008 (courtesy of Quickcharts)