Goldman Sachs raises CSN ratings recommendation to BUY
Friday, 23 Oct 2009
Dow Jones reported that Goldman Sachs raised its recommendation for Brazilian steel company Companhia Siderurgica Nacional from 'neutral' to 'buy'.
Goldman Sachs said that "Our top pick is CSN, while Usiminas and Ternium may struggle to continue their recent good out performance."
The report said that CSN stands out among Brazilian steel mills owing to its vertical integration with iron ore mines, which could bring benefits from the resumption of global mergers and acquisitions activity in the sector.
In the same report, Goldman Sachs reduced their recommendation for Usiminas to 'neutral' from 'buy.' Usiminas was downgraded because it had resumed production of steel when export prices were low.
According to Goldman Sachs, the recovery in steel demand is already priced into steel company shares in the short term, but there was little clarity on steel prices at home and abroad in the next three to six months.
Goldman Sachs forecast that EBITDA for Brazil's steel sector in 2010 would fall 10% on average owing to higher input costs. Next year, the bank sees iron ore prices rising 20% and coking coal by 40%.
Nevertheless, Goldman Sachs saw a rosy long-term future for Brazilian steel because China should become a net importer of steel.
