Tight supplies pushed steel prices up. An analyst says it could go on for a while.
Hot-rolled steel coil prices sizzled in the recovery and the heat ignited steel inventories.
United States Steel
are two and three times more
15% gain in the index this year, respectively, while
is up almost 80%. And, as Credit Suisse analyst Curt Woodworth sees, steel stocks aren’t cooling anytime soon.
The tight supply raised the benchmark price for hot-rolled coils to $ 1,600 per short ton, from $ 500 a year ago. A number of analysts downgraded their rating to Hold, recalling how quickly imports have collapsed during periods of tight supply in the past. But Woodworth believes the current bull cycle will last a few more years and investors should price stocks higher multiples. “The rebirth of the American steel industry is a real event,” he wrote in a note.
At $ 97 a share today, Nucor’s stock is up nearly 20% from Woodworth’s target price of $ 115.
have about 45% up from its targets, while United States Steel could rise 80% from the current $ 24 and Cleveland Cliffs a third from $ 22. He rates all of these stocks as outperforming.
Imports will remain low, he says, due to the cheap dollar and China’s restriction on polluting blast furnaces. Domestic supply will increase slowly, he adds, thanks to an increase in the capacity of electric arc furnaces. Demand from automakers and renewable energy developers will keep hot-rolled coil prices well above $ 1,000 until 2022. Steelmakers can make big profits at these prices, if not lower.
Woodworth believes Wall Street is accounting for a sharp correction in steel prices. But there is a new normal, he writes. “Steel stocks are particularly cheap.”
hosts a conference call to inform the investment community of their business prospects.
Goldman Sachs Group
kick off the earnings season by posting earnings before the market opens. The two central banks recently increased their dividends by 11% and 60% respectively.
Bank of the First Republic,
and PepsiCo publish quarterly results.
Dell Technologies is hosting a conference call to discuss its ESG strategy.
The labor office Statistics release the consumer price index for June. Economists are forecasting a 4.9% year-on-year increase, following a 5% jump in May, the fastest growth rate since August 2008. The core CPI, which excludes volatile food and food prices energy, is expected to increase by 4% against 3.8. % previously.
The National Federation of Independent Business releases its Small Business Optimism Index for June. The consensus estimate is for a reading of 99.5, roughly even with May’s figure.
Bank of America,
PNC Financial Services Group,
release the winnings.
The Federal Reserve is releasing the beige book for the fifth of eight times this year. The report brings together anecdotal evidence of current economic conditions in the 12 Federal Reserve districts.
BLS outings the June producer price index. The expectations are that the PPI and the core PPI will increase by 0.5% month over month. This compares to gains of 0.8% and 0.7%, respectively, in May.
Bank of New York Mellon,
Semiconductor Manufacturing In Taiwan,
hold conference calls to discuss quarterly results.
Kansas City South,
announce the winnings.
Bank of Japan announces its monetary policy decision. The central bank should largely keep its short-term key rate unchanged at -0.1%. In June, the BOJ announced that it would launch a climate change plan by the end of this year and publish a preliminary plan at its July meeting. This could take the form of higher interest rates paid to banks for green lending measures.
The University of Michigan releases its consumer sentiment index for July. Economists are forecasting a reading of 86.5, slightly higher than June’s 85.5. The index is still well below its pre-pandemic levels.
The census office reports retail sales data for June. The consensus estimate points to a monthly decline in spending of 0.5% to $ 617 billion, after falling 1.3% in May.
Write to Bill Alpert at [email protected]