Goldman Sachs Bullish On Steel

Goldman Sachs is getting bullish on the steel space. It is bullish on Steel Dynamics STLD, Schnitzer Steel SCHN, Nucor NUE, Reliance Steel RS & Metals USA Holdings Corp MUSA. In a note to clients, Goldman writes, "We see five reasons to be short term tactically positive on the steel sector: (1) the steel price decline appears to have halted at a reasonably high level; (2) raw material prices, particularly scrap, are defying the typical seasonal pattern and have either increased or remained relatively stable, thus providing cost support; (3) demand appears to be stable and early signs are that auto production could be stable in (seasonally slow) summer months as automobile parts supply chain has gradually recovered from the Japan earthquake; (4) inventories at the service center and end users are low which should keep order rates steady, and (5) steel stocks have significantly corrected and are down around 25% since mid-February compared to S&P down 7%. We believe that commentaries from the companies during their 2Q conference calls are likely to point to some optimism."