Catalysts On The Horizon For Metals & Mining Group; Deutsche Bank Upgrades, US Steel, AK Steel To Buy

After a rough start to 2017, steel investors may have a better go of it in the second half of the year. Deutsche Bank analyst Jorge Beristain has upgraded a handful of steel and aluminum stocks and is now constructive on steel prices following a sluggish second quarter. U.S. hot-rolled coil prices declined 9 percent in the second quarter, potentially masking a 4-percent year-to-date uptick in apparent steel demand based on increasing U.S. economic activity.

In addition to rising demand, supportive trade policy could also serve as a positive catalyst for steel prices, Beristain said.

“We believe underlying demand will recover and imports subside once Section 232 is formerly released (end-June last timeline) and signed into law by President Trump soon after (between 0 and 105 days),” Beristain wrote.

Related Link: A Long-Time US Steel Bear Is Impressed With New CEO, But Not With Stock

Deutsche Bank has cut its 2017 HRC steel price forecast by 2 percent to $620/ston but maintains its 2018 forecast of $600/ston. The firm also cut its 2017 forecasts for nickel by 7 percent to $9,832/t and is calling for iron ore prices to remain around $50/t.

Now that Deutsche Bank sees steel prices stabilizing, the firm has upgraded several steel and aluminum stocks:

• Upgraded United States Steel Corporation X from Hold to Buy.
• Upgraded AK Steel Holding Corporation AKS from Hold to Buy.
• Upgraded Century Aluminum Co CENX from Sell to Hold and raised price target from $10 to $15.
• Raised price target for Alcoa Corp AA from $37 to $44.

In addition to the upgrades, Beristain reiterated his top four Buy-rated stock picks in the space to be Arconic Inc ARNC, Kaiser Aluminum Corp. KALU, Reliance Steel & Aluminum Co RS and Steel Dynamics, Inc. STLD.

At Time Of Publication

• United States Steel shares were up 4.63 percent at $22.05.
• AK Steel was up 4.68 percent at $6.59.
• Century Aluminum was up 5.12 percent at $14.57.
• Alcoa shares were up 2.11 percent at $30.43.
• Kaiser shares were up 0.69 percent at $85.08.
• Reliance Steel & Aluminum shares were up 0.41 percent at $71.26.
• Steel Dynamics was up 1.13 percent at $33.89.
• Arconic shares were relatively flat, down 0.04 percent at $25.29.