Investing.com -- UBS upgraded Nucor (NYSE:NUE) and Steel Dynamics (NASDAQ:STLD) to Buy and maintained a Neutral rating on Commercial Metals Company (NYSE:CMC), citing increased U.S. steel trade protections and higher price forecasts.
UBS raised its price targets to $160 for Nucor and $149 for Steel Dynamics, while maintaining a $49 target for CMC.
UBS see a more constructive view for U.S. steel prices supported by recent tariff updates, with higher price decks expected to drive earnings momentum.
“We expect 2H25 demand to benefit from stabilization/recovery in traditional markets & federal stimulus, with offsets from tariff & retaliatory tariff related macro headwinds higher inflation/rates, lower growth,” analyst said.
Despite U.S. steel trade protections, steel equities have dropped over 16% from December highs, with Nucor down about 21%, Steel Dynamics down 16%, and CMC down 25%.
UBS expects U.S. hot-rolled coil (HRC) prices to average $800 per short ton (st) in 2026-2028, supported by a higher cost curve from increased scrap prices and import tariffs.
Current spot HRC prices have surged to around $950/st in Q1 2025, driven by Section 232 updates and proposed 25% tariffs on Canada and Mexico, as well as 20% on China.
UBS anticipates capacity additions, including BR2, Sinton, and Nucor West Virginia, along with higher domestic utilization (currently around 74%), to replace lost import tonnage and normalize trade flows, pulling prices back to the $800/st range by 2H 2025.
2025 U.S. steel demand is expected to decline only roughly 1%, with domestic shipments benefiting from 2.5% growth due to 20% import relief, UBS noted.
UBS remains cautious on rebar and CMC due to expected supply growth of around 15% in 2025, which could pressure pricing.
UBS concluded that the recent sell-off presents an attractive entry point for Nucor and Steel Dynamics, with tariff protections providing a solid platform for earnings growth through 2025.
