Ahead Of The Bell: Steel Sector

HARTFORD, Conn. (AP) — The economy is recovering too slowly to help U.S. steel manufacturers boost profitability soon, an analyst said Wednesday.

Mark L. Parr, an analyst at KeyBanc Capital Markets, said ferrous scrap prices could continue to decline over the next couple of months. He cited a recent $30 per ton decline in export scrap pricing.

"Domestic mills and export buyers remain on the sidelines, likely dampening the ability to substantially maintain or raise hot-rolled pricing realizations over the near term despite low supply chain inventories," Parr said in a client note.

Hot-rolled steel is used in autos, office furniture and appliances and is considered the industry's benchmark product.

Parr reduced his ratings for AK Steel Holding Corp. and U.S. Steel Corp. to "Hold" from "Buy," saying fourth-quarter outlooks from the two steel makers Tuesday were "somewhat disappointing."

"The outlooks clearly imply profit is very levered to pricing," Parr said. "With a more subdued pricing recovery unfolding, profit recovery will likely also be more gradual in nature."