Barclays Is Bullish On Steel Producers, Neutral On Copper Miners, And Cautious On Coal Companies

Barclays Is Bullish On Steel Producers, Neutral On Copper Miners, And Cautious On Coal Companies Matthew Korn of Barclays on Thursday commented that concerns on global growth and persistently weak commodity prices remain an overhang among the metals and mining group. Korn is bullish on steel producers given the producers exposure to an improving American steel demand that should offset the downward trend in steel pricing. The analyst favors Nucor NUE and Steel Dynamics STLD as they both stand to gain from steel consumption growth from construction, manufacturing and automotive industries. In addition, both companies have major projects that are expected to reach critical mass in 2015 that could drive greater raw material self-sufficiency, lower costs and improved cash flows. Korn is Neutral on copper miners as the bullish impact of lower-than-expected metal supply will outweigh a slowdown in Chinese consumption growth, pushing copper prices higher. The analyst adds that Southern Copper SCCO offers a more favorable risk profile compared to Freeport McMoRan FCX whose stock remains pressured by uncertainty around its Indonesian operations. Finally, Korn is cautious on coal companies as low natural gas prices along with growing utility regulations, and a slowing Chinese demand for imported coal will hurt demand. The analyst states that “there is really not much these companies can do” except hope for a price upturn. Nevertheless, Cloud Peak Energy CLD offers a “relatively healthy” balance sheet, a steady thermal-only PRB market and reasonable valuation on realistic pricing.