Sector Snap: Steel

HARTFORD, Conn. (AP) — Weak demand is threatening steel industry efforts to shield itself from low prices, an analyst said in a note to investors late Tuesday.

However, Goldman Sachs analyst Sal Tharani upgraded Olympic Steel Inc. and Nucor Corp., citing their strong balance sheets.

Tharani predicted further deterioration in end markets for steel such as nonresidential construction, autos, appliances, industrial production and energy.

Federal stimulus funding for infrastructure projects should help, but it will not offset "very weak private sector demand" and the impact will not be felt until the end of this year at the earliest, he said.

Tharani reduced his 2009 price estimate for hot rolled coil to $455 per ton from $534 per ton. He expects prices to bottom out in July at $430 and recover to $450 by the end of the year.

He raised his ratings for Nucor Corp. and Olympic Steel Inc. to "Buy" from "Neutral." Tharani also said he expects Nucor's earnings to outperform peers due to a low and variable cost structure and its diversified mix of products.