Market Overview

Credit Suisse: U.S. Steel Industry Is Changing


Credit Suisse analyst Nathan Littlewood thinks, "The US Steel Industry Is Changing, and the way we think about the space needs to change with it".

Domestic steel prices have been much higher than Littlewood expected, driven by outages in integrated mills and strong demand. Further, the import parity pricing model is not working.

Credit Suisse focuses on the domestic steel market because high barriers of trade separate global markets. This has been keeping domestic prices high in the midst of an international slowdown, especially in China. Nonetheless, no single "macro conditions are enough to make the US steel sector interesting," but several at once draw investor interest.

Related Link: Credit Suisse's 5 Reasons To Buy Union Pacific

Littlewood also commented on industry consolidation, which he believes is helping U.S. producers. Reasons include improved pricing power and a better return on capital. One risk is that unprofitable business lines will be supported within the large companies.

For these reasons, Littlewood argues that steel investors need to think about U.S. companies separately. Shares of United States Steel (NYSE: X), which Credit Suisse uses as a proxy for domestic producers, are up 26 percent in 2014.

Latest Ratings for X

Jan 2021Deutsche bankUpgradesSellBuy
Dec 2020Morgan StanleyInitiates Coverage OnEqual-Weight
Nov 2020GLJ ResearchUpgradesHoldBuy

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RUTHRaymond JamesMaintains23.0
FRGIRaymond JamesMaintains18.0
DINRaymond JamesMaintains85.0
DRIRaymond JamesMaintains137.5
CHUYRaymond JamesMaintains40.0
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