Commercial Metals (CMC) shares have fallen far more than rivals this year even as pressures on US rebar prices have started to ease, boosting prospects for the steelmaker, UBS Securities said Wednesday in a report.
Steel imports appear to have peaked, with Q1 volumes now back near typical levels, the report said. Rising steel prices in Turkey have also closed the gap that made foreign rebar cheaper to ship into the US, and a trade case targeting rebar from Bulgaria, Egypt, Vietnam and Algeria is moving toward final duties at the end of May, which could further limit low-priced imports, UBS said.
New domestic steel supply looks less disruptive than feared, the report said. A new mill run by Hybar in Osceola, Arkansas, is close to steady production, and most of the additional supply coming online is from Commercial Metals and Nucor (NUE), which already dominate the US market for rebar, the steel bar used to reinforce concrete in buildings, bridges and highways, UBS said.
Hybar, an "industry wild card," has a permit for a second, much larger mill and has discussed a possible third, posing a longer-term competitive risk, though only about 150,000 tons of new annual supply remain in the near term, the report said.
UBS upgraded its rating on Commercial Metals stock to buy from neutral and lifted its price target to $89 from $79.
Price: 72.67, Change: +2.34, Percent Change: +3.33
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