North America Steel 2Q Preview: Safe-Haven Status Back in Scope; Prefer OW-Rated NUE & CMC

Research evidence excerpt

North America Steel 2Q Preview: Safe-Haven Status Back in Scope; Prefer OW-Rated NUE & CMC

strategic move to discourage imports and hold recent price

levels higher-for-longer rather than a sign of easing fundamentals. NUE has

since raised its CSP again, and although it may be early to call a trend, we also

note lead times tracking at multi-year highs (Figure 19USHRCvs.LeadTimes/Figure 20USPlatevs.LeadTimes), mill

utilization at ~80% (Figure 21USStelMilIndustryUtilization) and our channel checks continue to point to lean

inventories and limited spot availability. As expected, imports have begun

trending higher with the arb increasingly open (Figure 18USHRCImportArbitrage) — May’26 imports

as a share of apparent consumption (17%) was the highest since Jul’25, but still

400bps below the pre-50%-S232 TTM avg. (Figure 22IndexedTotalStelShipmentsvs.Imports) — but we also suspect

NUE’s CSP pause may have some buyers second-guessing placing import

orders in anticipation of pricing rolling over. Beyond import arrivals and

lagged inflation risk, we also note incremental risk to mini-mills from potential

S301 tariffs (10-12.5%) on Brazilian pig iron, which accounts for ~60% of US

imports, albeit pig iron was eventually excluded from prior IEEPA tariffs.

• Sector de-rating looks overdone: Amid re-escalation in the Middle East, we

feel the sector’s relative safe-haven status has been underappreciated and could

soon find footing again on the back of solid 3Q outlooks. Mills’ supply chains

are generally insulated from the Strait, largely relying on domestic energy

(primarily electricity for mini mills) and scrap/iron units with the exception of

pig iron imports mostly from Brazil. Mini-mill sheet exposure (largest mix