U.S. Steel (X +2.8%) soars to its highest in nearly four years as Morgan Stanley upgrades shares to Hold from Sell with a $31 price target, up from $21, noting the company owns its own iron ore mines and is better positioned than peers to cope with rising commodity prices.
Analyst Carlos De Alba expects higher raw material cost inflation for steel companies but he sees U.S. Steel coping better than peers given its vertical integration into iron ore and comparatively less exposure to electric arc furnaces.
De Alba thinks a higher multiple for the stock is appropriate due to the potential for steel prices to stabilize at the current higher level or even increase.
“The current dislocation in the global steel market and rapidly increasing scrap/metallics prices may stop the ongoing steel price decline in the U.S.,” De Alba writes. “it may even result in steel prices bouncing from currently elevated spot levels of $1,000/st for [hot-rolled coil] due to the jump in raw material costs.”
U.S. Steel tops Seeking Alpha’s list of the three best steel stocks to buy in 2022.
