Steelmaker Winners & Losers: Nucor

Updated from 4:16 p.m. ET

Shares of two steel makers fell Friday as an analyst downgraded the manufacturers, saying a brief increase in steel prices is already built into their stock prices.

Analyst Sal Tharani of Goldman Sachs said in a note to clients that he expects "a short-lived spike in steel prices on the back of an unprecedented supply response in the face of one of the weakest demand environments.

"We believe that investors need to be more selective going forward," he said.

Tharani downgraded United States Steel (X Quote) to sell from neutral, saying he sees a potential downside to his $23 price target due to a deteriorating oil field equipment market, the company's fixed cost structure, the worsening economy in Europe and expensive valuations.

Furthermore, U.S. Steel's pension and post-employment benefits underfunding have increased by 90% to $5.1 billion, Tharani said.

Tharani downgraded Charlotte, N.C.-based Nucor (NUE Quote) to neutral from buy, primarily due to its high valuations, while praising the company's diversified product mix and low cost structure.

He also downgraded Olympic Steel (ZEUS Quote) of Bedford Heights, Ohio, to neutral from buy.

However, Tharani upgraded Los Angeles-based Reliance Steel and Aluminum (RS Quote) to buy from neutral, saying it trades at a discount of more than 40% to its peers.

Pittsburgh-based U.S. Steel and AK Steel Holding (AKS Quote) said Tuesday they expect operating losses in the first three months of 2009.

Shares of U.S. Steel closed down $2.86, or 8.7%, to $30.03. Nucor fell $2.24, or 5.2%, to $40.79. Reliance Steel fell 43 cents to $22.13 and Olympic Steel tumbled $1.75, or 9.9%, to $15.87. Shares of AK Steel lost 63 cents, or 7.2%, to $8.07.