This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.
U.S. steelmakers, led by Pittsburgh's U.S. Steel (X), have fallen into a sharp share-price decline this month off dismal earnings and concerns that global metal prices have reached a peak.
Shares of U.S. Steel have fallen 31% in May, followed by fellow members of Real Money's "Stressed Out" watchlist AK Steel (AKS) andTimkenSteel (TMST), whose shares dropped 27% and 20%, respectively.
Meanwhile, Nucor (NUE), the nation's largest steel producer, are down 8% so far on the month.
Concerns about overcapacity in the global market for steel mostly stem from Chinese exports, which some U.S. steelmakers say have driven prices down to levels that make it unfeasible to keep their steel mills running.
And on Tuesday, the Commerce Department outlined its final draft of anti-dumping taxes on Chinese and Japanese imports of cold-rolled steel at 266% and 71%, respectively -- measures largely designed to protect U.S. manufacturers. But the measures are not likely to have much of a long-term effect, analysts with KeyBanc Capital said in a Tuesday report.
"Near term, the ruling should continue to support market tightness (availability and pricing) in the U.S. carbon cold-rolled sheet market," the analysts said. "Import offers for both Chinese and Japanese material have been nonexistent over the last several months; thus, today's ruling likely does not change existing supply flows."
And according to analysts at Clarksons Platou, U.S. Steel's decline is only beginning, as the company's projected $850 million long-term EBITDA guidance is based on stable metal prices. (EBITDA is a standard valuation metric standing for earnings before interest, taxes, depreciation and amortization.)
"Given our belief that current conditions are close to peak levels (thanks to temporary global market tightness and a sharp restock from deeply destocked levels domestically), we think steel prices are likely to turn sharply lower between now and the end of the year," the analysts said. "Thus we are maintaining our Sell rating."
For more on Real Money's 20 distressed companies to watch:
Stressed Out: Introducing Real Money's Distressed Index
Stressed Out: Ultra Petroleum Files for Chapter 11
Stressed Out: Southwestern Energy Gets Creative in Turning Itself Around
