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My Steel Outlook After Caterpillar's Release

By Taylor Muckerman and Joel South - Apr 22, 2013 at 3:03PM

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Caterpillar lowered its guidance for its own 2013, but what did its release hint at for the coal and steel industries?

Prices for commodity metals have been falling since the fall of 2012, and that has prompted the miners of these metals to scale back capital expenditures to levels they feel are more suitable for the current environment. This pullback in spending has negatively affected Caterpillar (NYSE: CAT), a global bellwether with its ear to the ground of most commodity and industrial activity. While announcing its lowered guidance for company-specific earnings in 2013, it also offered up some projections for the coal and construction markets around the globe.

Do these two markets have the green light?
At least from Caterpillar's perspective, its own internal struggles might not be reflected in the global coal and construction markets in 2013 and 2014. In the notes of its release, the company states that it sees strength in both markets with non-residential construction strength in several key markets.

While coal demand doesn't necessarily mean improved financials for steel companies like AK Steel (NYSE: AKS), a strengthening non-residential construction market most certainly does. It reports tomorrow, so analysts Joel South and Taylor Muckerman will be watching to see if AKS has felt the effects that Caterpillar referenced, and whether or not the outlooks complement or contradict each other.

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