BlueScope Steel (bsl.AX): Reinstate at Buy on valuation, FCF inflection & tailwinds from US steel spreads

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BlueScope Steel (bsl.AX): Reinstate at Buy on valuation, FCF inflection & tailwinds from US steel spreads

Goldman Sachs BlueScope Steel (BSL.AX)

A$709m vs. VA cons ~A$690mn) and implies an increase of 10-25% HoH, and

includes ~A$80mn of surplus land sales from NSW (West Dapto) which will be

included in Corporate & Group. We forecast 1H FY27 (Dec H) EBIT of ~A$800mn (vs.

VA cons of ~A$740mn). We note guidance updates from US steel companies for

2Q26 were positive with Nucor (produces ~23Mtpa of steel & products, ~8-9Mtpa

ferrous scrap & Direct Reduced Iron) guiding to expected higher QoQ earnings

across all three operating segments (steel mills, steel products & raw materials), with

the largest increase in the steel mills segment driven by higher average selling prices

and stable volumes. Similarly, Steel Dynamics (produces ~12.5-13Mtpa of steel,

~5.5-6Mtpa ferrous scrap) guided to higher EPS, with meaningfully higher QoQ steel

profitability driven by strong demand and metal margin expansion as average

realised selling values rose more than scrap raw material costs.

n Long run volume and EBIT targets: Australian Steel products (ASP) domestic

volumes were resilient growing 1% HoH in 1H FY26 due to strength in the housing

market with COLORBOND and TRUECORE sales running the highest since 2022 and

running ahead of the CY26 targets, although we note the recent Aus Federal budget

has created uncertainty around housing investment near term. BSL has a long run

2030 EBIT target of ~A$2-2.5bn (~3x the FY25 level) which includes a A$500mn

group EBIT uplift from growth projects (US and AUS coated steel) and higher

downstream margins. We forecast 2030 EBIT of ~A$1.8bn.

n Balance sheet and capital returns: At the corporate level, BSL is accelerating