4/5/2007

AP

NEW YORK (AP) -- Shares of Nucor Corp. and Steel Dynamics Inc. moved higher on Thursday, after a Longbow Research analyst lifted his rating on both steel producers, citing improving pricing power.

David MacGregor said he lifted his ratings on both companies to "Neutral" from "Sell," citing improved pricing power for both flat rolled and long- or bar or rod-shaped- steel products.

The analyst said his upgrade is based on expectations of a recovery in flat rolled fundamentals, which are still experiencing weak end markets. Customers of these products include automotive, appliance and office furniture makers.

However, mills have successfully passed along higher scrap prices, said MacGregor.

Meanwhile, pricing improvements are expected for long product end markets, which include nonresidential construction.

MacGregor noted that both Nucor has about 40 percent business exposure in each market, while Steel Dynamics' business is split about 50/50 between rolled and long steel.

Merrill Lynch analyst David A. Lipschitz in a client note dated Wednesday likewise noted prices for rolled products are up, fueled by cost pressures.

"Although we believe that inventories will continue to decline over the coming months and are still positive on the outlook for steel, we remain Neutral on steel stocks," added Lipschitz.

Nucor shares added $1.18, or nearly 2 percent, to $66.84 on the New York Stock Exchange in afternoon trading, while shares of Steel Dynamics gained 55 cents to $43.80 on the Nasdaq Stock Market.