In a report published Tuesday, Nomura analyst Curt Woodworth
argued that the United States is the biggest loser in the steel trade wars.
According to Woodworth, there are two major structural
changes underway that should "significantly" alter the global steep
landscape in the coming years: The first being the continued strengthening of
the U.S. dollar, while the second change being a curve deflation drive by lower
raw material prices and freight rates.
Woodworth expanded that the cost curve deflation in Russia
and China, coupled with weak domestic demand trends in both nations should
result in continued export pressure into the global market.
"We believe these forces are highly disruptive to the
US market, especially for integrated producers, but also EAF players to some
degree," Woodworth wrote. "We note that both flat-rolled and long
product import pressure has been a significant headwind for the industry over
the past year and Nomura expectations for further USD appreciation into 2016
suggests import pressure will remain high."
Woodworth added that U.S. integrated produces are most at
risk from a margin standpoint, mostly due to lower relative cost reductions and
greater volume share loss potential that would pressure unit costs.
Rating Changes
Shares of AK Steel Holding Corporation AKS 0.48% were
downgraded to Neutral from Buy with a price target lowered to $4 from a
previous $10.
Shares of United States Steel Corporation X 4.08% were
downgraded to Neutral from Buy with a price target lowered to $21 from a
previous $37.
Shares of Steel Dynamics, Inc STLD 2.83% were
reaffirmed with a Buy rating with a price target lowered to $22 from a previous
$24.
Source- steel guru