Cleveland Cliffs Inc (CLF)

[abracky]

Cleveland-Cliffs, Steel Dynamics top steel picks at JPM; U.S. Steel a Sell

Jun. 16, 2021 2:57 PM ETCLF, SLX...By: Carl Surran, SA News Editor


Steel stocks have have surged this year but investors will need to be more selective about their picks from now on, J.P. Morgan says in recommending Cleveland Cliffs (CLF -1.3%) and Steel Dynamics (STLD -2.0%) while rating U.S. Steel (X -4.1%) at Underweight.

"While we are believers in a higher-for-longer market given the pace of economic recovery in the country, extended mill lead times and low inventories through the system, longer-term, new EAFs likely will add 10%-12% to sheet capacity, which along with imports, should ultimately catalyze a top in price," JPM's Michael Glick writes.

Cleveland-Cliffs owns both traditional blast and electric furnaces, and mines its own iron ore, which Glick likes, and he thinks value can be created as the company pays down debt from two recent acquisitions.

Steel Dynamics is one of the "highest quality" players in remelting, Glick says, and he touts the company's recent capacity expansions and low-cost structure.

U.S. Steel results are the best in years, but Glick says he likes other stocks more.

The firm rates Nucor (NUE -2.2%) and Commercial Metals (CMC -3.5%) at Neutral.