Major Steel Players Set For Better 2017, JPMorgan Says

Higher steel prices have set the stage for improved performances by the major players in the Steel industry. JPMorgan’s Michael F. Gambardell commented on four Steel majors, revisiting their estimates.

US Steel

Analyst Michael Gambardell maintained an Overweight rating for United States Steel Corporation X, while raising the estimates for 2017 and the price target to $28.

“We continue to believe that domestic steel sheet prices should be supported by U.S. supply cuts in the form of reduced imports from positive sheet trade case rulings as well as domestic capacity curtailments,” Gambardell wrote.

AK Steel

The analyst maintained an Overweight rating for AK Steel Holding Corporation AKS, while raising the EPS estimate for 2017 and reinstating the price target at $6. He said that US carbon sheet steel prices were rising, backed by domestic production cuts, declining imports due to positive preliminary duties from the three sheet trade cases, and China’s improving steel metrics.

“By themselves, we believe production cuts and lower U.S. imports are enough to push carbon steel sheet prices higher in the US, and we expect structurally higher prices going forward,” Gambardell commented.

Nucor

JPMorgan maintained an Overweight rating for Nucor Corporation NUE, while raising the EPS estimate for 2017 and the price target to $55. Gambardell believes mini-mills like Nucor would continue to witness margin expansion, with steel prices increasing faster than scrap prices.

“US steel prices should continue to be supported by supply cuts in the form of reduced imports due to positive sheet trade case rulings as well as domestic capacity curtailments,” the analyst stated. He explained that although scrap prices are likely to rise, the increase will not be at the same rate as the rise in US steel prices, since the strong USD makes it more difficult for the US to export scrap.

Steel Dynamics

Gambardell maintained an Overweight rating for Steel Dynamics, Inc. STLD, while raising the 2017 EPS estimate and the price target to $29, citing higher steel prices.