After a rough start to 2017, steel investors may have a better go of it in the second half of the year. Deutsche Bank analyst Jorge Beristain has upgraded a handful of steel and aluminum stocks and is now constructive on steel prices following a sluggish second quarter. U.S. hot-rolled coil prices declined 9 percent in the second quarter, potentially masking a 4-percent year-to-date uptick in apparent steel demand based on increasing U.S. economic activity.
In addition to rising demand, supportive trade policy could also serve as a positive catalyst for steel prices, Beristain said.
“We believe underlying demand will recover and imports subside once Section 232 is formerly released (end-June last timeline) and signed into law by President Trump soon after (between 0 and 105 days),” Beristain wrote.
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Deutsche Bank has cut its 2017 HRC steel price forecast by 2 percent to $620/ston but maintains its 2018 forecast of $600/ston. The firm also cut its 2017 forecasts for nickel by 7 percent to $9,832/t and is calling for iron ore prices to remain around $50/t.
Now that Deutsche Bank sees steel prices stabilizing, the firm has upgraded several steel and aluminum stocks:
- Upgraded United States Steel Corporation (NYSE:X) from Hold to Buy.
- Upgraded AK Steel Holding Corporation (NYSE:AKS) from Hold to Buy.
- Upgraded Century Aluminum Co (NASDAQ:CENX) from Sell to Hold and raised price target from $10 to $15.
- Raised price target for Alcoa Corp (NYSE:AA) from $37 to $44.
In addition to the upgrades, Beristain reiterated his top four Buy-rated stock picks in the space to be Arconic Inc (NYSE:ARNC), Kaiser Aluminum Corp. (NASDAQ:KALU), Reliance Steel & Aluminum Co (NYSE:RS) and Steel Dynamics, Inc. (NASDAQ:STLD).
At Time Of Publication
- United States Steel shares were up 4.63 percent at $22.05.
- AK Steel was up 4.68 percent at $6.59.
- Century Aluminum was up 5.12 percent at $14.57.
- Alcoa shares were up 2.11 percent at $30.43.
- Kaiser shares were up 0.69 percent at $85.08.
- Reliance Steel & Aluminum shares were up 0.41 percent at $71.26.
- Steel Dynamics was up 1.13 percent at $33.89.
- Arconic shares were relatively flat, down 0.04 percent at $25.29.
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