When a sea of conflicting messages rattles investors' confidence in the clarity of their market perspective, I like to turn to the forgers of steel for a no-nonsense glimpse of the state of industrial activity.
Steel Dynamics (Nasdaq: STLD) released guidance this week for earnings per share of $0.37 to $0.42 in the first quarter, roughly in line with analysts' estimates of $0.40. To accompany a welcome 33% increase to the quarterly dividend, chairman and CEO Keith Busse gave investors something of a pep talk: "We are encouraged by the current levels of general demand we are seeing, including some moderate increases in activity at our Structural and Rail Division as rail continues to be an area of focus, and we remain optimistic concerning the nation's economic improvement."
Because I had seen the makings for a potential industrywide margin squeeze in recent results from POSCO (NYSE: PKX) and other leading producers, Steel Dynamics' sneak peak at increasing margins (and volumes) across all its business segments over recent months frankly came as something of a surprise. Offering a wholly distinct perspective, however, ArcelorMittal's (NYSE: MT) Lakshmi Mittal cautioned last month: "The recent rise in raw materials prices that will affect all steelmakers has been worrying since it means we have to try very hard to pass the price increases on to customers."
Meanwhile, none of the industry's bigwigs are conveying the sort of defensive posture that one might expect if the industry were bracing for a markedly troublesome period. Nucor (NYSE: NUE) recently broke ground on a landmark $750 million direct reduced iron facility in Louisiana, and forecasts a return to profitability for the first quarter after reporting an $11.4 million loss for the fourth quarter of 2010. ArcelorMittal's net loss, incidentally, was far more pronounced at $780 million.
Nucor rival U.S. Steel (NYSE: X) has pledged to spend some $990 million on strategic projects during 2011, with particular emphasis upon productivity and cost-related initiatives like enhanced coke production facilities and implementation of an enterprise resource planning (ERP) system. ArcelorMittal is focusing on the growth in Asian steel demand by acquiring a 40% stake in Thailand's G Steel.
Amid a flurry of activity in this industry that never sleeps, I found POSCO's partnering with two regional competitors to acquire a 15% stake in one of only three producing niobium mines in the world particularly interesting. Fools will recall that Taseko Mines (AMEX: TGB) recently generated quite a buzz with its discovery of an apparent world-class niobium deposit, and anyone wishing to understand that small and obscure market is encouraged to begin here. Gold miner IAMGOLD (NYSE: IAG) has indicated its desire to spin off its niobium mine in Quebec, and this Fool interprets POSCO's purchase as a very positive sign for likely interest in such a move.
Among these demonstrative actions by steelmakers, I perceive a range of underlying motives at work, including: geographical restructuring, productivity enhancement, and raw material procurement (with related cost controls). In my view, this mirrors the disparate market outlooks conveyed by the statements quoted above. In other words, I see signs of an industry that lacks a clear, consensus view of what the future holds.
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of IAMGOLD and Taseko Mines. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
