Commodities & Metals
Why Key Analyst Sees Major Steel Losing Momentum
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While steel prices in the United States may see some near-term upside, driven by seasonal restocking, gradual demand growth and mounting protectionist trade barriers, one key analyst fears that momentum may run out of steam into summer. After a strong run of equity performance for U.S. steelmakers, these valuations are increasingly hard to justify, and as a result the firm is making a few downgrades.
Jefferies downgraded Reliance Steel & Aluminum Co. (NYSE: RS), Commercial Metals Co. (NYSE: CMC) and Olympic Steel Inc. (NASDAQ: ZEUS) to Hold, and United States Steel Corp. (NYSE: X) to Underperform. Steel Dynamics Inc. (NASDAQ: STLD) and Nucor Corp. (NYSE: NUE) remain top picks.
Following a painful 2015 with falling demand and shipments, 2016 should benefit from an end of destocking and sustained growth in non-resi construction, offset by further oil and gas contraction. In the firm’s proprietary Steel Survey, 62% of respondents have seen higher quarter-over-quarter demand in the first quarter, and looking forward into the next quarter, 58% expect higher demand and 81% expect higher prices in the coming three months.
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