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U.S. Steel downgraded at Credit Suisse, as iron ore pricing to settle lower

  • US Steel (X -1.3%) is downgraded to Underperform from Neutral at Credit Suisse due to relative valuation and expected lower iron ore pricing in H2 2014.
  • Equity prices, and particularly US Steel, seem to be overlooking recent commodity price weakness as a short-term destock related phenomenon - perhaps not surprising given the 2012 collapse and rebound in iron ore prices - but Credit Suisse believes that, unlike 2012, structural changes to the global ferrous supply/demand balance through mid-year will see commodity prices settle at a lower level in H2 than they did after the 2012 destock shock.
  • Also, the firm thinks US Steel's relative outperformance vs. international peers including ArcelorMittal (AT) likely is due to EM/DM exposure trade, but the gap will close at some point.
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Comments (3)
  • sethmcs
    , contributor
    Comments (3277) | Send Message
     
    Do these guys understand the businesses they cover? If your input costs drop your margins should increase. I loath analysts but I especially dislike Credit Suiess.
    14 Mar, 05:04 PM Reply Like
  • confused1978
    , contributor
    Comments (3) | Send Message
     
    I agree. If iron ore is cheaper isnt that a good thing for X?
    15 Mar, 02:10 AM Reply Like
  • d1ringer
    , contributor
    Comments (11) | Send Message
     
    US Steel has their own mines. Steel will be priced across the board for all makers that have to buy ore which will maintain prices for X. If makers lower their prices for their steel then it will effext X. The cost for steel won't go down because all makers will use the decrease in ore to raise their profit margins.
    18 Mar, 10:34 AM Reply Like
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