Uralsib analysts said that Russian steel prices have bottomed out and that export and domestic demand will be driving further price increases in the months to come. Expect Russian steel stocks like Mechel and Severstal to continue their rally as the price climbs.

Russian steel prices had been down since October 2011, largely as a reaction to falling Chinese steel prices, which in turn were affected by a slowdown in Chinese construction caused by government curbs on property values.

Uralsib analyst Mr Dmitri Smolin said that demand is now improving across the world due to low steel inventories and the Russians are in a good position to take advantage of it. Russian steel production is already running at 85% of capacity and has almost recovered to 2008 levels.

Russian steel company stocks are responding to the increase in demand, rallying about 25%. However, they remain among the cheapest steel stocks in the world.

Mr Smolin expects steel stocks to continue upward in February 2012 and March 2012, with Severstal and Mechel as top picks. The Uralsib analyst also likes Evraz as a rebound play due to the company's exposure to mining.

Severstal does not trade in the US and Evraz is lightly traded. However, Russian steel accounts for more than 7% of the Market Vectors TR Russia ETF.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group Inc.

(Sourced from www.nasdaq.com)