Commodities & Metals

Credit Suisse: 'Let's Not Split Hairs' Over the Steel Supercycle

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From a low of around $450 a ton in late August last year to more than $1,200 a ton by March 1 of this year, the spike in steel prices certainly qualifies as a supercycle. Or as a cycle that is super from a steelmaker’s point of view.

In a new review of the steel industry, analysts at Credit Suisse note that the past year has been “extraordinary” for global steel markets, with prices for flat-rolled steel reaching record highs last month. The analysts comment, “Demand is strong across virtually all major verticals and years of capacity rationalization and consolidation have finally collided with a synchronous global demand recovery, leaving steel in shortage in many regions.”

Credit Suisse believes the cycle has more room to run and the U.S. producers are in the best position to take advantage of the strong demand for steel. Analyst Curt Woodworth writes that currently “US prices are the highest and raw material costs are the lowest, a virtue of the US being very net long scrap, iron ore, and coking coal.” U.S. prices for hot-rolled coil steel are about $400 a ton higher than European prices.

Credit Suisse has made the following changes in its ratings and 12-month price targets for six steel companies.

U.S. Steel

The rating on United States Steel Corp. (NYSE: X) rose from Underperform to Outperform, and the firm raised price target from $15 to $35.

Saying that recent “structural changes” at the company, as well as in the global steel market, favor U.S. Steel, the analysts raised their rating two notches “to account for significantly higher earnings estimates and a higher target multiple.” The company’s decision to end its upgrade project at the Mon Valley plant, combined with the acquisition of Big River Steel, were major drivers of the upgrade.


Credit Suisse upgraded Cleveland-Cliffs Inc. (NYSE: CLF) to Outperform from Neutral and raised price target from $21 to $24.

The analysts write that Cleveland-Cliffs “has put together three best in class mining/steel companies, to create a powerhouse steel entity [and] is now remarkably well balanced with four electric arc mills, eight blast furnaces, and 100% backward integration into iron ore pellet/HBI [hot briquetted iron].”

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