New York, September 13 (Patrika English News): The North American steel industry is facing weak pricing and subdued demand, leaving investors cautious ahead of third-quarter guidance updates. Yet, according to JP Morgan’s latest mid-quarter note, Nucor Corporation (NYSE:NUE) and Reliance Steel & Aluminum (NYSE:RS) remain the sector’s most resilient players.
Pricing Pressure Persists
Hot Rolled Coil (HRC) prices are down 6% quarter-to-date, while scrap prices have held steady, offering little relief to margins. Despite a 16% month-over-month and 21% year-over-year drop in imports in August, and a 2-million-ton rise in domestic shipments this year, real demand remains muted, with inventories at adequate levels.
Utilization Up, But Demand Weak
Industry utilization rates have climbed above 79%, but JP Morgan warns that pricing pressure and range-bound trading could extend through Q4. Smaller fall outages compared with last year and rising production add to the challenges.
The firm argues that stronger growth may depend on multiple Federal Reserve rate cuts and clarity on U.S. trade policy with Mexico and Canada — catalysts unlikely in the short term.
Stock Performance and Ratings
Despite ongoing price erosion, steel equities are up 17% this quarter, outpacing the S&P 500’s 6% gain but lagging the metals and mining index’s 28%. Since July, shares have re-rated higher by about 6%, largely on investor expectations of a more favorable pricing environment — a trend JP Morgan sees as premature.
Company Ratings and Price Targets:
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Nucor (Overweight): $165
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Reliance Steel & Aluminum (Overweight): $350
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Steel Dynamics (Neutral): $150
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Cleveland-Cliffs (Neutral): $10
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Commercial Metals Company (Neutral): $54
Earnings Outlook
For Q3, JP Morgan models earnings declines of 4% for Nucor and 6% for Steel Dynamics compared with Bloomberg consensus. Nucor’s diversified portfolio is expected to cushion softer plate pricing, while Steel Dynamics faces lingering coated inventory and losses at its aluminum rolling mill.
Commercial Metals (CMC) has gained 12% this quarter on rebar strength, while Cleveland-Cliffs has rallied 18% despite a 27% cut to its 2025 EBITDA forecast due to debt and limited diversification.
Long-Term View
Valuations reflect contrasting expectations. Nucor and Steel Dynamics trade at a premium 8.0x EV/EBITDA 2026, supported by tariff protection, while Cleveland-Cliffs trades at 6.5x, weighed by leverage. CMC also sits at 6.5x, modestly above historical levels.
JP Morgan concludes that companies with diversified earnings streams, disciplined capital allocation, and operational flexibility — particularly Nucor and Reliance — are best positioned to weather current industry headwinds.