[Click eStock] NI Steel, Construction Steel Supply Shortage... Fair Price 9,900 Won

[Asia Economy Reporter Hyungsoo Park] Research Alom forecasted on the 14th that NI Steel will benefit from the rise in construction steel prices. It suggested a target price of 9,900 won.

NI Steel is a company that manufactures, sells, and leases steel products and was listed on the KOSPI market in June 1975. It produces construction steel materials. The domestic rebar price rose from 700,000 won per ton (S400, 10mm) in January to over 1,200,000 won last month. Following rebar, H-beam prices also surged vertically. The price, which was 790,000 won per ton at the beginning of the year, is now trading at 1,990,000 won this month.

Researcher Kim Doyoon of Research Alom explained, "Steel prices went through a correction period for two weeks after the sharp rise in domestic prices in China last month," adding, "This was influenced by the Chinese government's intervention in overheated raw material prices and rumors about the possible relaxation of steel operation rate restrictions in Dangshan City, China."

He continued, "We consider this a temporary phenomenon," emphasizing, "The Chinese government is still appointing top leadership to the Carbon Neutral Control Tower Work Leading Group, expressing its commitment to low carbon."

He added, "It seems that steel production will be regulated," and noted, "The relaxation of steel operation rate restrictions in Dangshan City is judged to be a market rumor."

The Housing Industry Research Institute announced that the June Housing Business Sentiment Index rose by 11.8 points from the previous month to 113.0. However, the material supply and demand outlook plunged by 27.5 points to 58.9 compared to the previous month. Due to delays in the supply of construction steel materials, supply instability is being experienced. It confirms that supply is insufficient compared to demand.

Researcher Kim analyzed, "Expansion of Dangjin Plant 1, a construction steel production facility, and Dangjin Plant 2, a leased steel correction facility, is underway," and "The land contract for Dangjin Plant 3 was completed at the end of 2020, and preparations for its establishment are in progress."

He said, "The planned investment amount for the leasing process this year is 11.8 billion won," and "There are plans to invest 13 billion won to expand leased steel." He added, "From next year, an additional investment of 140 billion won is planned," explaining, "Since the investment will be made with 100% equity capital, there is no risk of additional debt increase."

Researcher Kim stated, "The biggest differentiator from other steel companies is the leasing business," and explained, "Before starting construction, temporary materials are installed during excavation work and recovered and sold after the construction is completed." He emphasized, "By using leasing, construction companies do not need to directly handle the complicated processes of purchase, recovery, and sale," and added, "Since the recovered steel is corrected at the factory and re-leased, the margin is large, showing a higher operating profit margin than other small and medium-sized steel companies."