May 23, 2019 / 12:33 PM / 5 months ago

BUZZ-U.S. steel stocks: Excess HRC capacity to hurt prices, says CS

** Credit Suisse cuts price targets on certain U.S. and Canadian steel stocks, while downgrading some, citing surplus capacity of hot-rolled coil (HRC) steel in the United States, despite tariffs on imported steel

** CS downgrades AK Steel Holding Corp to “underperform” and Steel Dynamics Inc to “neutral”, cuts PT for AKS by 71% to $1 and by ~24% to $29 for STLD

** Cuts PT for Nucor Corp by 11% to $62, United States Steel Corp by 18% to $9 and Stelco Holdings Inc to C$19 from C$19.73

** AKS down 8% at $2.03 premarket, X down 3.5% at $ 13.76 and STLD slightly up at $28.45

** Restart of ~2.5 million tonnes (MT) of old capacity has pushed the ~27mt HRC market into surplus, with more volume set to enter the market in 2H 2019 and ~8mt of new capacity to enter from 2020-2022 - CS analyst Curt Woodworth

** “We now forecast HRC prices of $550/ton in 2022 but expect prices would have to test ~$470/ton to force a permanent rebalancing of the US supply curve,” says Woodworth, as current industry average price is about $590/ton

** Adding to the pain is the removal of (Canada) tariffs, which will allow Stelco and others to become much more aggressive in targeting the U.S. market - Woodworth (Reporting by Ankit Ajmera in Bengaluru)

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