Ahead Of The Bell: Steel Sector

HARTFORD, Conn. (AP) — The recession-battered steel industry is expected to begin a gradual recovery as plants ramp up production, an analyst said as she established a "Buy" rating for several companies.

"We believe the market is currently pricing in a strong recovery in steel volumes," analyst Dana Guido of Merriman Curhan Ford said in a note to investors late Thursday.

Capacity utilization at steel minimills should increase to 60 percent in the third quarter, to 70 percent in the fourth quarter and to 80 percent next year, she said. And Guido said she expects consolidation in the iron ore market will "continue to provide pricing power" with international prices rising 10 percent in 2010.

Guido also said she expects the price of hot-rolled sheet steel, which is used in autos, office furniture and appliances and is considered the industry's benchmark product, will rise in the third quarter.

She initiated coverage of Cliffs Natural Resources Inc., AK Steel Holding Corp. and CMA Corp. Ltd. with "Buy" ratings.

Guido said Cleveland-based Cliuffs Natural Resources should earn 82 cents per share for 2009 and $3.82 pr share next year. Analysts surveyed by Thomson Reuters expect a loss of 4 cents per share in 2009 and $2.26 per share for 2010.