Market Overview

An Under-The-Radar Steel Name Is Getting A Big Boost Today

An Under-The-Radar Steel Name Is Getting A Big Boost Today

Mechel PAO (ADR) (NYSE: MTL) is rallying strongly, rising to a three-year high on roughly 1.7 times its average volume.

The stock has been on a tear in recent months. After dipping below the $2 level in late April and languishing in the sub-$2 range until August, the stock has nearly tripled in the run up to Monday's session.

Logic doesn't defend the upward surge. The Russian steel-making and coal-mining company may be at the receiving end of the new political era that is dawning. In his quest to re-invent America, President-elect Donald Trump seems to eye anything un-American as a pariah.

Is Steel Industry Optimism Rubbing Off On Mechel?

That said, steel makers as an industry group stand to benefit from the thrust on infrastructure spending. Morgan Stanley said in a note Monday, Trump's plans for increased infrastructure spending and trade protection could boost demand for steel on the one hand and curb import supply on the other, thereby resulting in significant undersupply in the U.S. steel market. Given this backdrop, the analyst upgraded the higher beta names.

From Where Does The Optimism Stem?

Does the optimism stem from a release out last Friday?

The company said in a release it has attended the 22nd International Industrial Exhibition Metal-Expo held at the All-Russia Exhibition Center in Moscow on November 8–11, 2016.

Commenting on the reception to its booth, Mechel-Steel Management Company's CEO Andrey Ponomarev said, "Mechel Group's booth became one of the most visited and lively negotiation areas. This year we saw a great influx of visitors and increased interest toward our steel companies' products. Over these four days we managed to reach dozens of new agreements, strengthen and expand longstanding partnerships."

In late August, the company reported 9 percent EBITDA for the first half, and it reversed to a profit from a loss a year ago. Revenues, however, were flat.

The company is also seeking to restructure the debt it has managed to pile up over the years of operation, as prices of its end products fell, and hasn't been able to service. Recent reports suggest that the company has stuck an accord with state lenders to push back its debt repayment and is also in negotiations with foreign lenders, who are clamoring for additional collateral.

With not many clues into what is leading to the buying binge on Monday, one can only hope it is a leg up toward a more sustainable uptrend.

At time of writing, shares of Mechel were up 19.27 percent at $6.50.

Latest Ratings for MTL

Dec 2020CIBCInitiates Coverage OnOutperformer
Jul 2020BMO CapitalMaintainsOutperform
Jul 2020ScotiaBankMaintainsSector Outperform

View More Analyst Ratings for MTL
View the Latest Analyst Ratings


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