Nomura Says U.S. Is The Biggest Loser In Steel Trade Wars, Downgrades 2 Names
In a report published Tuesday, Nomura analyst Curt Woodworth argued that the United States is the biggest loser in the steel trade wars.
According to Woodworth, there are two major structural changes underway that should "significantly" alter the global steep landscape in the coming years: The first being the continued strengthening of the U.S. dollar, while the second change being a curve deflation drive by lower raw material prices and freight rates.
Woodworth expanded that the cost curve deflation in Russia and China, coupled with weak domestic demand trends in both nations should result in continued export pressure into the global market.
"We believe these forces are highly disruptive to the US market, especially for integrated producers, but also EAF players to some degree," Woodworth wrote. "We note that both flat-rolled and long product import pressure has been a significant headwind for the industry over the past year and Nomura expectations for further USD appreciation into 2016 suggests import pressure will remain high."
Woodworth added that U.S. integrated produces are most at risk from a margin standpoint, mostly due to lower relative cost reductions and greater volume share loss potential that would pressure unit costs.
Shares of AK Steel Holding Corporation (NYSE: AKS) were downgraded to Neutral from Buy with a price target lowered to $4 from a previous $10.
Shares of United States Steel Corporation (NYSE: X) were downgraded to Neutral from Buy with a price target lowered to $21 from a previous $37.
Shares of Steel Dynamics, Inc (NASDAQ: STLD) were reaffirmed with a Buy rating with a price target lowered to $22 from a previous $24.
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