The earnings of GLOBAL and DOHOME should recover sequentially through 2023, following the 2022 steel price dive. We expect substantially stronger 2H23 numbers (low 2H22 bases and boosts tied to post-election spending). Our preference remains GLOBAL.
Steel product prices gradually recovering (positive for GM)
After bottoming out in 4Q22, steel product prices started rising in 1Q23-to-date (Figure 1-2), presumably led by China’s economic recovery (so much heavier Chinese demand for steel). In contrast with the last steel price run—fueled by a worldwide post-lockdown demand jump among developed markets that started in 4Q20 (and kept high by Russia’s Feb 2022 invasion of Ukraine)—this time around steel prices are likely to rise more gradually and peak at lower levels. As such we expect the GMs of GLOBAL and DOHOME to resume pre-steel price rally era levels (23-25% for GLOBAL and 15-17% for DOHOME versus above 25% for GLOBAL and 20-22% for DOHOME during 2021-1H22).