US steel stocks
US steel prices have fallen sharply this year. Prices had surged to multiyear highs in the first half of 2018 after President Trump imposed Section 232 tariffs. However, US steel prices came under pressure in the second half of the year, and the weakness has amplified this year.
As steel prices have fallen, analysts have also taken a bearish view of the sector. Earlier this month, Credit Suisse double downgraded AK Steel (AKS) from “outperform” to “underperform.” It also downgraded Steel Dynamics (STLD) from “outperform” to “neutral.” U.S. Steel has also had a series of downgrades amid concerns over its cash burn and weak competitive position. Notably, except for Nucor (NUE), all leading US-based steel producers have fallen to their 52-week lows. Read Are Trade Wars Easy to Win? Lessons from the Steel Industry for more analysis.
Today, Deutsche Bank has downgraded several steel stocks. It has downgraded Nucor to “hold” from “buy” and lowered its target price from $65 to $53. Last week, Credit Suisse lowered Nucor’s price target from $70 to $62, while KeyBanc lowered it from $70 to $66. Deutsche Bank also downgraded U.S. Steel (X) to “sell” from “hold” and lowered its target price from $20 to $11. It also cut AK Steel’s target price from $2.5 to $2.0. Deutsche Bank also downgraded Steel Dynamics to “hold” from “buy,” lowering its target price from $44 to $30.
The escalation in the US-China trade war has been among the factors that have negatively impacted sentiments in the metals and mining sector. Given China’s dominant share in global metals demand, any negative news related to China has a disproportionate impact on metals and mining stocks. Read Words of Wisdom from Warren Buffett as Trade War Escalates for more analysis.