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

|By:, SA News Editor

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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