Metals and precious metals have had a very tough go of it for years, and a stunning move in iron ore since lows that were put in last December may be marking not only the end of that price drought, but the end for steel as well. Iron ore prices are up 66% since December, and with the Chinese targeting 6.5% to 7.0% economic growth, which was above expectations, they will employ stimulus that could increase the demand for steel.
A new research report from the analysts at JPMorgan says the news out of China is a positive for American steel producers, and they continue to believe that supply cuts from U.S. capacity curtailments, along with positive trade rulings, are the primary reasons pushing domestic steel prices higher. Four companies are expected to benefit from these price increases, and all have stocks rated Overweight at JPMorgan.
This stock has almost doubled since January and may still have huge upside. AK Steel Holding Corp. (NYSE: AKS) is a world leader in the production of flat-rolled carbon, stainless and electrical steel products, primarily for automotive, infrastructure and manufacturing, construction and electrical power generation and distribution markets.
Headquartered in West Chester, Ohio (the Greater Cincinnati area), the company employs approximately 8,000 men and women at eight steel plants, two coke plants and two tube manufacturing plants across these six states: Indiana, Kentucky, Michigan, Ohio, Pennsylvania and West Virginia.
AK Steel recently announced that it will increase current spot market base prices for all carbon flat-rolled steel products by a minimum of $30 per ton, effective immediately with new orders. Needless to say, this will generate higher revenues, and it is a positive for shareholders.
The JPMorgan price target for the stock was not available. The Thomson/First Call consensus target price is $2.30. The stock closed way above that on Wednesday at $3.69 a share.
This top steel company could do very well if the economy sees a solid pick-up. Nucor Corp. (NYSE: NUE) and its affiliates are manufacturers of steel products, with operating facilities primarily in the United States and Canada. The company also is North America’s largest recycler.
Nucor products produced include: carbon and alloy steel — in bars, beams, sheet and plate; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating and expanded metal; and wire and wire mesh. Nucor, through David J. Joseph, also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap.
While the residential construction market could slow down some in 2016 after years of a very torrid pace, top Wall Street analysts remain positive on nonresidential commercial construction. Nucor always has kept a very conservative balance sheet and is poised for slow but steady growth next year and beyond.
Nucor investors are paid a very solid 3.38% dividend. The JPMorgan price objective is posted at $43, and the consensus target is higher at $45.94. The stock closed most recently at $43.54 per share.