BlueScope Steel: Transferring Coverage; Fair Value Estimate Raised 6% to AUD 17.50

We raise our fair value estimate for BlueScope Steel by 6% to AUD 17.50 per share after transferring coverage to a new analyst. A key driver of the upgrade is stronger expectations for steel spreads at North Star, the firm’s electric arc furnace in North America, contributing about 35% of midcycle earnings. Here, we forecast steel spreads averaging 5% higher over our forecast based on our expectation for medium-term steel futures prices and spreads. We also expect a faster ramping of volumes following debottlenecking. We now expect North Star sales volumes reaching 3.5 million metric tons by fiscal 2027 from 2.4 million in fiscal 2023. We previously expected debottlenecking to be completed in fiscal 2030.