After the Department of Commerce released its report on U.S. investigations into the impact on national security from imports of steel mill products, Morgan Stanley analyst Piyush Sood explored the three steel import scenarios presented, saying he assign the highest probability to the "tariff+quota" scenario. In all scenarios, he sees outsized gains for pipe/tube/OCTG producers and a tighter flat rolled market, calling U.S. Steel (X) a "key beneficiary." He thinks other flat rolled producers - including Steel Dynamics (STLD), Nucor (NUE) and AK Steel (AKS) - would benefit from greater tightness, but sees U.S. Steel as the biggest beneficiary of higher pricing, he tells investors.

BMO Capital lowered the firm's price target on Nucor to $200 from $210 and keeps a Market Perform rating on the shares after its Q1 earnings miss. Following nine consecutive quarters of beating expectations, Nucor's results and outlook disappointed, while its Q2 results are also expected to moderate sequentially, the analyst tells investors in a research note. Nucor remains well-positioned to benefit from positive longer-term demand tailwinds, but its capex spending elevated, BMO adds.

Reports Q1 revenue $4.7B, consensus $4.74B. "The teams executed well delivering a solid first quarter performance," said Mark D. Millett, Chairman and Chief Executive Officer. "Underlying steel demand was steady in the quarter; however, we experienced some steel order volatility early in the quarter as customer inventories remain incredibly low and scrap prices declined month over month in the quarter. Customer orders rebounded strongly in March supporting increased pricing and solid order backlogs, especially within our value-added coated flat rolled steel products portfolio. The teams achieved strong first quarter 2024 operating income of $751 million and adjusted EBITDA of $879 million," continued Millett. "The sequential improvement in earnings was driven by our steel and metals recycling businesses and supported by continued historically strong results from our steel fabrication operations. Across the company, our teams achieved strong performance, while keeping each other safe."

Pre-earnings options volume in Steel Dynamics is 1.7x normal with puts leading calls 8:5. Implied volatility suggests the market is anticipating a move near 3.3%, or $4.48, after results are released. Median move over the past eight quarters is 4.0%.

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JPMorgan US Clean Tech/Metals & Mining Analyst Peterson and CFO Laxton hold a 1Q24 earnings follow-up conference call to be held on April 23 at 2 pm hosted by JPMorgan. Webcast Link

Says will continue to buy back stock "hand over fist." Says Cleveland-Cliffs (CLF) "the only U.S. solution" for U.S. Steel (X). Says will have to "re-assess value" of U.S. Steel. Says targeting net debt to EBITDA of 2.5x. Says balance sheet in "great shape, near record liquidity." Sees CapEx ~$1B/year from 2025-2028. Comments taken from Q1 earnings conference call.

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"We expect earnings in the second quarter of 2024 to decrease compared to the first quarter of 2024. The largest driver for the expected decrease in earnings in the second quarter of 2024 is the decreased earnings of the steel mills segment, primarily due to lower average selling prices partially offset by modestly increased volumes. The steel products segment is expected to have moderately decreased earnings in the second quarter of 2024 as compared to the first quarter of 2024 due to lower average selling prices, partially offset by increased volumes. Earnings in the raw materials segment are expected to be higher in the second quarter of 2024 as compared to the first quarter of 2024 due to the increased profitability of our direct reduced iron facilities and scrap processing operations."

Pre-earnings options volume in Nucor is 4.3x normal with puts leading calls 19:5. Implied volatility suggests the market is anticipating a move near 4.1%, or $7.84, after results are released. Median move over the past eight quarters is 5.5%.