A Little on the Steel Situation

As steel producers jockey for position, here are a few notes I made early last week on a few that I am watching;

AK Steel - While in the middle of a labour dispute, key market for AK is automotive. If TK doesn't get Dofasco, I think AK/TK would be able to form a synergistic entity to hold its own against Mittal's ISG group (it's US interests). I believe that AK is the current NA frontrunner for a takeover. AK could strengthen TK's stainless portfolio, and give TK a larger presence in NA for automotive, which it was looking for with Dofasco.

Algoma Steel - With the recent announcement of the $200 million special dividend, this is enough of a "fix" to get Paulsen off Turcotte's back for a bit. Problem is, a drop in steel prices of about 10%, will spell trouble for Algoma. It needs the cash in the bank to weather the next turndown. Turndown won't be that bad, but, shareholders will be knocking at the door for returns.

Stelco - This is a tough one -- New equity holders have done the right thing to split up the business into 9 units. The jewel of Stelco is Lake Erie works. Look for someone to show interest and offer something for Lake Erie works to speculate on the increased need for flat rolled to supply Toyota and Honda. Who will be the suitor? My guess is Nucor may be looking around, or even TK.