Morgan Stanley analyst Carlos De Alba slashed his rating on U.S. Steel by two notches, to "underweight", and nearly halved his price target on the group to $17 a share. He also revised price targets for Cleveland-Cliff (CLF) - Get Free Report, taking it to $21 from $26 per share, and Nucor (NUE) - Get Free Report, which he lowered to $105 per share from $115 per share.
Earlier this month, Goldman Sachs analyst Emily Chieng lowered her price target on the U.S. Steel to $21 a share, while cutting the group's rating to "sell" from "neutral', in a major sector update for a near-term market correction as hot-rolled coil steel (HRC) prices are around 140% north of their historical levels this year, at around $1,500 per ton, driven by stronger industrial demand and a "lagging supply response."
U.S. Steel said it expects adjusted current quarter profits of around $2 billion, a 50%-plus increase from the prior period, adding it's reduced its overall debt by around $2.7 billion so far this year, excluding that linked to its 2019 acquisition of Big River Steel.
However, capacity increases including U.S. Steel's plans for a $3 billion mill that will start producing in 2024 -- will test the 'higher-for-longer' thesis (for broader steel prices) as the government moves to finalize its multi-trillion stimulus bill.
Overall, U.S. mills -- including U.S. Steel -- have produced 71.4 million tons of crude steel so far this year, according to data from the American Iron and Steel Institute, a 20.26% increase from the same period last year. Average capacity utilization is now at 81.1%, up from just 66.8% over the same period last year.
U.S. Steel shares ended down 1.18% at $21.85. The stock is up 30% so far this year. Cleveland-Cliffs shares edged down 0.37% to end at $21.38, while Nucor stock ended the day 0.74% higher at $102.53.