Steel prices should rise in H1 2017, Jefferies says, but downgrades CMC, WOR

|By:, SA News Editor

Steel markets seem to be hitting a "cyclical sweet spot," Jefferies analysts say, predicting U.S. and European steel prices likely will rise significantly into H1 2017, backed by a raw materials cost push, seasonally stronger demand and lower imports.

Yet Jefferies downgrades Commercial Metals (CMC -0.9%) to Hold from Buy with a $24 stock price target and Worthington Industries (WOR -3.3%) to Underperform from Hold with a $45 target, as it sees “limited upside for some equities” and the risk of a near-term pullback in view of the recent sector rally.

CMC offers attractive construction exposure but valuation seems stretched and margins could come under pressure, and WOR is trading at peak multiples with upside limited by autos appearing poised to plateau, the firm says.

Jefferies maintains Buy ratings and lifts its price targets for AK Steel (AKS -2.6%), Nucor (NUE -1.9%), Steel Dynamics (STLD -0.3%) and ArcelorMittal (MT +0.8%).

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