AK Steel Holding Corporation (AKS), Steel Dynamics, Inc. (STLD): Is It Time to Buy This Steel Giant?

The world’s largest steel producer, ArcelorMittal (ADR) (NYSE:MT) is trading at a forward P/E (1yr) of 10.28, and has a dividend yield of 4.30%. Just like AK Steel Holding Corporation (NYSE:AKS), it didn’t have a good 2012. But, as steel prices are expected to recover to some extent, things look better for the steel giant in 2013. According to the sell side, ArcelorMittal has a mean recommendation of 2.3, suggesting that it’s a better buy than AK Steel. You can have a further look at my detailed take on ArcelorMittal here.

Conclusion

In 2013, the driving force behind the steel industry would be China’s growing demand. Last year, Chinese demand for steel took a toll due to a weak global economy. As the global economy starts to move steadily towards recovery, steel prices are also expected to recuperate. The recent auto boom, along with a strong heavy equipment industry, would make sure that steel prices don’t move backward. In addition, low raw materials’ costs would drive the margins up.

In case of AK Steel, a high beta of 1.99 reflects that it’s a hugely cyclical stock. Therefore, it depends to a great degree on the global steel industry. As the steel industry is expected to perform better this year, same is the case with AK Steel Holding Corporation (NYSE:AKS). Though the steel industry is back on track, slow European market and rising imports mean that the industry needs more time before it finally grabs the bull by the horns. As a result, I still remain neutral on AK Steel.

The article Is It Time to Buy This Steel Giant? originally appeared on Fool.com and is written by Waqar Saif.

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