Sector Snap: Goldman warns on steel companies

Recent rally in steel stocks unwarranted, warns Goldman analyst; shares drop

Associated Press

NEW YORK (AP) -- The steel market is still troubled, and the recent rally in steel company shares a mistake, said a Goldman Sachs analyst.

Analyst Sal Tharani cut his view for the steel industry to "Cautious" from "Neutral" and downgraded AK Steel Holding Corp. to "Sell" from "Neutral."

Tharani said that steel shares are due for a drop as investors realize that demand won't pick up substantially any time soon. A big supply of steel will also keep price increases in check, he predicted. Higher prices for steel would likely benefit the steelmakers.

Shares of several large steel companies have risen in the past two months on hopes for a strong recovery in steel demand and recent price increases.

For example, since mid-November, AK Steel shares had risen 24 percent. But they're still down 55 percent over the past 12 months. The stock dropped 33 cents, or 7 percent, to $4.11 in heavy afternoon trading Monday.

The analyst also backed "Sell" ratings for U.S. Steel Corp., Schnitzer Steel Industries Inc. and Cliffs Natural Resources Inc. U.S. Steel, which had gained 22 percent since mid-November, fell 82 cents, or 3 percent, to $23.71. Schnitzer dropped 65 cents, or 2 percent, to $29.71; and Cliffs edged down 52 cents to $35.19.

Tharani was also pessimistic on aluminum, on Monday cutting Century Aluminum Co. to "Sell" from "Neutral." Century Aluminum shares fell 34 cents, or 4 percent, to $8.52. Rival aluminum maker Alcoa Inc. shed 14 cents, or 1.6 percent, to $8.89.

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