US steel stock collapses following Morgan Stanley double downgrade
United States Steel Company (X) – Get the United States Steel Corporation report stocks were hit after a “double downgrade” from Morgan Stanley analysts linked to falling metal prices and the group’s expansion plans.
Morgan Stanley analyst Carlos De Alba downgraded his US Steel rating two notches to “underweight,” and nearly halved his price target on the group to $ 17 a share. He also revised the price targets for Cleveland-Cliff (FCF) – Get the Cleveland-Cliffs Inc report, bringing it to $ 21 from $ 26 per share, and Nucor (NAKED) – Get the report from Nucor Corporation, which he lowered to $ 105 per share from $ 115 per share.
Earlier this month, Goldman Sachs analyst Emily Chieng lowered her US steel price target to $ 21 per share, while lowering the group’s rating to “sell” from “neutral,” in a major sector update for such a hot short-term market correction – Coiled steel (HRC) prices are around 140% north of their historical levels this year, at around $ 1,500 per tonne , due to stronger industrial demand and a “late supply response”.
US Steel said it expects adjusted earnings for the current quarter of about $ 2 billion, an increase of more than 50% from the previous period, adding that it has reduced its overall debt. approximately $ 2.7 billion so far this year, excluding that related to its acquisition of Big River in 2019. Steel.
However, capacity increases – including US Steel’s plans for a $ 3 billion plant to begin production in 2024 – will test the “higher for longer” thesis (for prices of steel) as the government prepares to finalize its multibillion-dollar stimulus bill.
Overall, US factories – including US Steel – have produced 71.4 million tonnes of crude steel so far this year, according to data from the American Iron and Steel Institute, an increase of 20, 26% compared to the same period last year. Average capacity utilization is now 81.1%, down from just 66.8% in the same period last year.
US Steel stock ended down 1.18% at $ 21.85. The stock is up 30% so far this year. Cleveland-Cliffs shares edged down 0.37% to close at $ 21.38, while Nucor shares ended the day up 0.74% at $ 102.53.