The steel industry is poised to exit the recession as markets improve, prices rise and other factors benefit steel manufacturers, an analyst said as he upgraded the sector Monday.
Goldman Sachs analyst Sal Tharani upgraded the sector to "Attractive" from "Neutral."
In a client note, he said steel manufacturers' shares have underperformed those of other companies, steel and scrap prices in the U.S. have hit bottom, prices in China are rising and industrial and auto demand should improve next year.
Tharani said positive signs for the sector include rising iron ore and coking coal prices, which are used in steel production, and a weak dollar, which will deter imports and boost exports. Also, he expects steel makers to be cautious as they increase supply, and he said that demand from emerging markets, is improving.
He recommended that investors buy shares of United States Steel, Steel Dynamics inc., AK Steel Holding corp. and Nucor Corp.