Steel shares strengthen after Morgan Stanley upgrade

Steel shares strengthen after Morgan Stanley upgrade

Steel shares shot up last Tuesday after Morgan Stanley upgraded the sector from in-line to cautious. In afternoon trading, Mittal Steel rose 2.7 percent to $30 and U.S. Steel gained 3.8 percent to $44.36. Steel Dynamics was up 5.6 percent at $33.83, AK Steel up 4.2 percent at $9.58, and Oregon Steel was up 3 percent at $22.41. Nucor, which Morgan Stanley upgraded to overweight from equal-weight, was up 5 percent at $58.49. Morgan Stanley attributed the upgrade to improving inventory, pricing, and production trends in the industry, particularly the rising prices of scrap. Morgan Stanley metals analyst Wayne Atwell said, “Due to industry discipline, we believe excess steel inventory has been worked off, production is likely to rise in the mid to late fourth quarter, steel prices appear to have bottomed and will begin to rise again early to mid-fourth quarter.” Atwell said it appears that hot-rolled steel prices are now bottoming in the $390 to $420 per ton range, and should move up to $430 per ton in the fourth quarter. After the fourth quarter, he expects the price to rise to as much as $470 per ton. He also said that domestic prices are profiting from steel consumers’ recent hesitance to import metals during the recent “soft phase.” Despite this optimistic industry forecast, many feel that China’s rapidly growing steel capacity poses a threat to the U.S.