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How Wall Street Sees Steel Stocks ahead of 4Q17

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Part 4
How Wall Street Sees Steel Stocks ahead of 4Q17 PART 4 OF 8

Bulls or Bears: Who’s Take the Trophy for U.S. Steel?

Bulls or bears

Among the analysts covering U.S. Steel (X), J.P. Morgan and Axiom Capital have divergent views. J.P. Morgan has been quite bullish on U.S. Steel for the last few quarters. On the other hand, Axiom Capital has been bearish on steel stocks like U.S. Steel and Cleveland-Cliffs (CLF). So far in 2017, while bulls have had their shares of victory, bears seem to be winning the game as is illustrated by U.S. Steel’s price action. In this article, we’ll see whether bulls or bears could call the shots in 4Q17.

Bulls or Bears: Who’s Take the Trophy for U.S. Steel?

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Outlook

US steel prices have shown resilience despite higher imports. Stable steel scrap prices, positive market sentiment, and reasonable spreads between US and international steel prices are supporting US steel prices. Bears expect US steel prices to weaken in 4Q17. The fourth quarter is generally weak for steel pricing due to the seasonal demand slowdown.

However, US steel prices have shown no signs of the typical seasonal slowdown that we saw in the last two years. On the contrary, US steel mills are pushing for a fresh round of price hikes. The undertone in the US steel industry looks reasonably bullish. If we don’t see any global shock in 4Q17 that could trigger a collapse in global steel prices, bulls might fancy their chances in the coming months.

If we see some sort of import protection from the Trump administration, it could provide further impetus to US steel prices (AKS)(MT). However, steel companies—including Nucor (NUE)—have toned down their expectations from the ongoing Section 232 imports probe.

In the next part of this series, we’ll discuss the Section 232 imports probe further.

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