Steel Sector Continues the Rally as TSTH Hits the Ceiling, BSBM Gains 20%

The steel sector in the Stock Exchange of Thailand extended its gain on Monday, April 26, 2021, led by TSTH and BSBM in response to positive momentum on steel prices.

 

As of 12:05 local time in Thailand, Tata Steel (Thailand) Public Company Limited (TSTH) rose ฿0.43/share or 29.45% to ฿1.89/share with a trading value of 831 million baht.

Bangsaphan Barmill Public Company Limited (BSBM) gained ฿0.32/share or 20.78% to ฿1.86/share with a trading value of 122 million baht.

TMT Steel Public Company Limited (TMT) increased ฿1.20/share or 11.65% to ฿11.50/share with a trading value of 115 million baht.

 

Asia Plus Securities (ASPS) stated in the analysis and reiterated its recommendation to invest in commodity stocks that many groups have limited impact from the COVID-19 resurgence and the growth continued to recover in line with the global economy, such as the steel sector.

The surge in steel price buoyed by the shortage of upstream iron ore in Australia, coupled with the Chinese government plan to lower the carbon dioxide in the steel industry by 30% within 2025, resulting in substandard steel mills to be shut down.

Meanwhile, the demand for steel around the world has recovered to a high level, driven by the manufacturing and construction sectors, while the steel supply in China (Steel Consumption accounted for 50% of the world) is insufficient to meet the demand due to its rapid economic recovery.

 

As a result, ASPS expected that steel prices will continue on the upside-trend for at least the next 3 months. Meanwhile, the current Thai midstream iron producers have accelerated their production to 50-60% from 30% in the previous period, taking the opportunity to export their products to foreign markets such as the United States. The price of hot rolled steel is around 1,100 USD/ton, compared with the domestic sales price of 900 USD/ton. Although the price has risen since the beginning of the year, it is still lower than the foreign market around 200-300 USD per ton.

 

ASPS recommended investing in TMT Steel Public Company Limited (TMT) with a revised target price from Bt11.00 to Bt14.80, expecting 1Q21 earnings to make a record high at 425 million baht (+145% QoQ and 244% YoY), driven by the higher steel price. TMT’s average selling price in 1Q21 was expected to increase 21.8% QoQ to Bt24.8 per kilogram, and was expecting to increase 5% (MoM) in April to Bt27.00 per kilogram. ASPS adjusted its estimation for steel price in 2021-2023 to Bt26.80-27.00 per kilogram.