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Nucor leads steel names lower amid market oversupply worries

Oct. 18, 2018 2:37 PM ETNucor Corporation (NUE) StockWOR, NUE, MT, CMC, X, AKS, TS, RDUS, RS, CLF, SLX, ZEUS, MTUSBy: Carl Surran, SA News Editor20 Comments
  • Nucor (NUE -1.8%) slides as a Q3 drop in steel shipments from the previous quarter sparks concerns that the U.S. market may be oversupplied, undermining Pres. Trump's tariffs on imported steel.
  • "There appears to be too much inventory in the channel right now, and this has impacted mill orders and volumes" in early Q4, says Longbow Research analyst Chris Olins.
  • The imposition of the tariffs raised futures prices for U.S. hot-rolled coil steel from $660/ton in January to $924 at the start of June, but they have since fallen back to $834.
  • "Hot rolled coil prices continue to grind lower and our channel checks suggest large size orders at $800/ton or below," says Credit Suisse analyst Curt Woodworth, who has previously downgraded the steel sector (SLX -2.8%) on concerns over a glut in U.S. supply.
  • Analysts also worry that NUE's investments in new production plants, including a $240M rebar mill in Florida, and other steelmakers' plans to ramp up capacity will exacerbate oversupply.
  • Other steel names also are trading in the red: X -1.4%, MT -2.6%, AKS -3.2%, CMC -1.2%, CLF -2.7%, RS -1.9%, WOR -3.3%, TS -2.1%, TMST -1.7%, SCHN -1.4%, ZEUS -2.2%.

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