Some Excerpts on Raw Materials
We like others have been communicating the rise of energy and raw material costs. Let me take a minute and review some of the specific price changes the industry is experiencing...
Next we'd like to point out the sheer magnitude of the increases. From the first half of last year to the first of this year, these costs have increased between 35% to over 80%. In addition, the U.S. dollar declined versus a market basket of the A dollar, the Real, the C dollar, and the Euro by approximately 15%.
With the exceptionally high increase in costs, we need to focus on company with strong pricing power. In best case scenarios, we can find oligopolies.
About China
End markets in China continue to be showing strength. We expect consumption in China to increase approximately 20% this year. We've lowered our projection slightly due to the earthquake relief effort but the projected increased activities in building and construction and to more application and transportation-related areas such as auto and bus platform.This speaks for itself.
Coupling those comments with Cleveland Cliffs' (CLF) increased profit projections, there is little reason to believe that the growth in China is being derailed.
All China (commodity) names are back onto the BUY list.
U.S Steel (X) is a BUY @ 164.90
AK Steel (AKS) is a BUY @ 55.85
Cleveland Cliffs (CLF) is a BUY (although its up 15% today Michael Luce has purchased $350 million between $98-114) @ 107.00
I would like to reemphasize my Buy recommendation on Foster Wheeler (FWLT) at $62.80.
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