Key insights
- A long position in Bluescope Steel (BSL) was initiated due to a perceived undervaluation after a takeover rejection and strong US earnings momentum driven by high HRC spreads and tariffs. The North Star division's performance in the US is highlighted as a key driver, with positive read-through from Sims Limited's earnings. This suggests a potentially bullish outlook for US-based steel operations, indirectly benefiting related US equities.
Bluescope Steel ($BSL) Added a 3.5% long position. Flipped from short to long.
- Since BSL's soft rejection of SGH's revised takeover proposal on 26 Feb 2026, BSL share price has fallen by more than 4%. There is zero M&A premium factored into the price at current levels. * Earnings momentum in the US are at least very much turning. The North Star mini-mill in the US margins continue to rip and are up 10% the past month. HRC spreads have reached a 26-month high in March. Remember, the US has placed steel tariffs on foreign mills. * While Asian spreads remain at historically low levels, the North Star division is effectively carrying the group’s valuation, which is why the board recently rejected multiple takeover bids (up to $32.35/share) as "significantly undervaluing" the company. * Today, Sims Limited (SGM) reported strong earnings supported by strong non-ferrous metal prices and a buoyant memory chip market. A strong positive read-through for the BSL margin thesis for its US-based North Star operations.