With the global economy still wallowing in a malaise from which it has yet to recover, it's not surprising that Companhia Siderurgica Nacional (NYSE:SID), one of the largest vertically integrated steel companies in the world, let alone Brazil, is languishing. Even the once seemingly bulletproof economy of its home country could barely muster 1% growth last year, and 2013 isn't looking too promising, either. Economists believe Brazil will be lucky to see 3% growth this year, a target below even the modest 4% GDP growth rate pegged by the government.
Since CSN derives around 63% of its revenues from Brazilian markets and another 15% from Europe -- which itself suffered a near 9% decline in demand for steel last year, according to ArcelorMittal (NYSE:MT) -- the fact that CSN's stock is down 51% from its 52-week high isn't surprising. What might raise an eyebrow, though, is the high opinion of it still held by investors. Motley Fool CAPS shows that the steelmaker maintains an above-average four-star rating with 96% of the 924 members weighing in on it believing it will be able to outperform the broad market averages.
According to the World Steel Association, global steel consumption is expected to rise 3.2% this year and even ArcelorMittal is looking for steel sales to rise 2% to 3% with iron ore sales up as much as 20%.
Even so, the real fulcrum for CSN's growth will be Brazil because of its outsized contribution to revenues and there are indications beyond its GDP that it is under way.
There's still weakness, of course, as global capacity slipped to 71% in January from 75% a year ago, according to the world steel group, but the government announced a $66 billion 25-year stimulus program last summer that will be invested in the country's road system and railroads. Some 60% of that money will be spent within the next five years.