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Steel stocks have taken a beating in the past year, but one Wall Street analyst said Monday a seasonal ramp in U.S. steel demand should help boost prices in the near-term.
The Analyst
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Morgan Stanley analyst Piyush Sood made the following changes to his steel coverage:
- AK Steel Holding Corporation (NYSE:AKS) downgraded from Overweight to Equal-Weight, price target cut from $5 to $3.
- United States Steel Corporation (NYSE:X) upgraded from Underweight to Equal-Weight, price target cut from $30 to $21.
- Cleveland-Cliffs Inc (NYSE:CLF) reiterated at Equal-Weight, price target cut from $10.50 to $10.
- Commercial Metals Company (NYSE:CMC) reiterated at Equal-Weight, price target cut from $26 to $21.
- Nucor Corporation (NYSE:NUE) reiterated at Equal-Weight, price target cut from $73 to $62.
- Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) reiterated at Underweight, price target cut from $26 to $22.
- Steel Dynamics, Inc. (NASDAQ:STLD) reiterated at Overweight, price target cut from $52 to $42.
The Thesis
Market dynamics should stabilize steel prices and most steel stocks in the first half of 2019, Sood said. However, he wouldn’t be surprised to see downward pressure on steel prices resume in the second half of the year.
“As tariffs are eased further in 2019 and supply/imports increase, steel prices will once again come under pressure, beginning in 2H19,” Sood wrote in a note.
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He said buyers have mostly stayed on the sidelines in recent in anticipation of lower prices down the road. That dynamic drove hot rolled coil steel prices down from a peak of $920/t in summer 2018 to recent levels of between $640/t and $690/t. Morgan Stanley forecasts late Q1 and Q2 HRC prices of around $700/t driven in part by China stimulus demand.
In the longer term, the firm is forecasting 2020 and 2021 HRC prices of $660/t and $640/t, respectively.
Price Action
Here’s how the steel stocks mentioned reacted to the new commentary Monday:
- U.S. Steel was down 0.1 percent.
- Steel Dynamics was down 0.4 percent.
- Schnitzer Steel was down 2.4 percent.
- Nucor was down 1.2 percent.
- Commercial Metals was down 1.1 percent.
- Cleveland Cliffs was down 1.9 percent.
- A.K. Steel was down 6.4 percent. The company reports fourth-quarter earnings Monday afternoon.
Related Links:
Steel Stocks Have Wall Street's Attention
Seaport Global Says The Steel Industry Is Due For A Bounce
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.