Although I cover many industries at the Fool, I have to admit a special affection for steel. Why? Because nowhere else have I found competing (and supplying, and consuming) companies within a single industry to be such willing providers of the kinds of scuttlebutt that can help an individual investor figure out what's going on with the big picture.
I first noticed this back in 2004, when I began to get interested in steel companies, inspired by a Wall Street Journal article citing several companies' announced plans to ramp up their manufacturing capacity to take advantage of the sudden resurgence in profits for this industry. (I criticized those plans; that criticism was either prescient or about two years too early, depending on how kindly you look upon it.) That same year, I discovered a great source for insight into near-term steel trends in the form of scrap recycler Schnitzer Steel
This week, I found another great resource in Canadian value-added steel processor Novamerican
Guess what? They bit. Specifically, global steel magnate and Motley Fool Inside Value pick Mittal Steel
This is significant for many reasons, not the least of which is confirmation of what Novamerican has been saying about the growing steel inventory glut. But I think the most important lesson a Fool should draw from Mittal's action is that it supports what Novamerican President Scott Jones told us in our recent interview (read an abridged version here, or take a free trial of Inside Value and see the whole interview for free). To wit, the dynamics of the steel industry have changed with the recent wave of consolidation among the bigger players. Mittal's sua sponte idling of two furnaces demonstrates how a single interested company now has the power to "manage the market" for steel so as to maintain profits for all.
Now all we need to do is sit back and see whether Mittal's gambit works.
Delve into our historical steel scuttlebutt collection in:
Or for more recent news and views, feel free to peruse our interview with Novamerican's Scott Jones.