Investing in the Steel Sector
Content supplied by Breakaway Research
While historically a small sector, the Australian Steel sector dramatically expanded with the listing of Smorgon Steel in 1999, followed by the BHP spin offs; OneSteel in October 2000 and BHP Steel (now called BlueScope Steel) in July 2002.
Steel products are broadly categorised into long products (like railway lines, beams, wire, reinforcing bar, etc.) and flat products like hot rolled coil which many then be processed into panels for cars, whitegoods, etc. OneSteel originally represented the long steel division of BHP while BlueScope was the flat steel division.
Smorgon Steel has a diverse range of products covering both flat and long products. Another significant industry participant, Sims Metals is focused on the recycling of ferrous and non-ferrous scrap and secondary processing of base metal scrap.
The share prices of these companies are affected by the outlook for international steel and steel scrap prices which, like other commodities, have been affected by strong Chinese demand in recent years. However, the impact of China has been greater on the international pricing of flat steel products given that China has a greater production capacity for long steel products than flat products.