- U.S. Steel (X -4.5%), AK Steel (AKS -5.5%) and Steel Dynamics (STLD -2%) all plunge in early trading after Credit Suisse downgrades the sector to Market Weight from Overweight, becoming the first tier 1 firm to turn cautious on the steels after their big run-up.
- Credit Suisse believes the round of price increases announced this week will mark the peak in the U.S. market for 2017, forecasting hot rolled prices to average in $625/ton in Q1 and then decline to $535/ton by year-end as domestic capacity rises "significantly" by Q2.
- The firm also sees sharp declines in bulk material prices in H2, and believes benefits from U.S. infrastructure spending growth are limited; the heavy lifting on U.S. steel trade policy has been largely finalized after changes to injury laws and successful trade case outcomes in 2016.
- X, AKS and STLD are downgraded to Neutral From Outperform, with respective stock price targets of $30, $9.50 and $36; Nucor (NUE -0.8%) and Commercial Metals (CMC -2.2%) are maintained at Neutral with respective $56 and $19 price targets, and Cliffs Natural Resources (CLF +1%) is rated Underperform with a $6 target.