Sector Snap: Steel makers fall on lowered ratings
NEW YORK (AP) — Shares of steel manufacturers fell Thursday after an analyst lowered ratings on the companies, suggesting a recent jump in domestic prices may prompt more customers to buy cheaper imported products.
Dahlman Rose & Co. analyst Anthony B. Rizzuto Jr. lowered his rating to "Hold" from "Buy" for four companies: United States Steel Corp., Steel Dynamics Inc., Nucor Corp. and ArcelorMittal.
His rating on AK Steel Holding Corp. was cut to "Sell" from "Hold." Rizzuto also reduced his price target to $5 per share from $5.92 per share.
Quoted prices for hot-rolled steel have risen about 13.6 percent since early July to $670 per short ton from $590 per short ton, Rizzuto stated. Domestic steel scrap prices are higher, too.
Hot-rolled steel is used in a wide range of products from automobiles and airplanes to appliances.
During the same timeframe, share prices for some steel companies have increased in a range from 9 percent to nearly 30 percent. "We believe the move was justified, given the increase in quoted steel prices...but think that industry fundamentals point to a move lower from current levels," Rizzuto wrote in a research note to clients.
Global steel prices, particularly in Asia and Eastern Europe, remain near recent lows, which could prompt more U.S. customers to buy steel from other countries. In turn, that would put pressure on domestic prices, he said.
"Until we see evidence of global price stability, primarily in China, either through production curtailments or demand increases, we believe it will be difficult for domestic steel prices to remain at such relatively elevated levels," the analyst stated.
In midday trading, shares of AK Steel Holding Corp. fell 21 cents, or 3.6 percent, to $5.71; ArcelorMittal dropped 9 cents to $15.89; Nucor Corp. decreased 96 cents, or 2.4 percent, to $39.59; Steel Dynamics was down 51 cents, or 3.9 percent, to $12.55 and U.S. Steel fell $1.02, or 4.5 percent, to $21.75.