Newsflow Is Turning Positive For Steel Industry, US Steel

The steel industry could soon move much higher, according to Longbow Research analyst Chris Olin.

“Recent conversations with North American distributors levered to the energy markets suggest NT upside potential for the U.S. Steel (X) X] Tubular Segment. Upward momentum for steel products used in drilling applications could get this segment back to breakeven before 2018, following 10–11 consecutive quarters of negative EBIT results,” Olin wrote.

This led Olin to remain bullish on shares of U.S. Steel, rating the company a Buy with a price target of $30.

3 Catalyst That Could Drive 2018 EPS Much Higher

1. A positive Section 232 remedy.
2. Increase in Chinese steel and iron ore price.
3. Less headwinds for metal companies who are exposed to energy demand.

Reasons To Be Bullish

• Demand for oil country tubular goods remains very strong.
• Distributions still want to build inventories.
• Tubular pricing is up 40 percent since December of 2016.

While the medium-term outlook seems to be slightly less certain, it is evident even as crude oil and natural gas prices fall, Olin still sees demand for metals products.