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US Steel Stock Falls On Double Downgrade From Morgan Stanley

United States Steel shares fell sharply Monday but regained some ground by the closing bell, after a double downgrade, to underweight, from Morgan Stanley analyst Carlos De Alba.

United States Steel Corp.  (X) - Get United States Steel Corporation Report shares were hit after a 'double-downgrade' from analysts at Morgan Stanley linked to lower metals prices and the group's expansion plans. 

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 Cleveland-Cliffs Inc Report, taking it to $21 from $26 per share, and Nucor  (NUE) - Get Nucor Corporation 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."

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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.