New York (CNN Business)A bubble could be brewing in steel stocks.
The pandemic brought the American steel industry to its knees last spring, forcing manufacturers to shut down production as they struggled to survive the imploding economy. But as the recovery got underway, mills were slow to resume production, and that created a massive steel shortage.
Now, the reopening of the economy is driving a steel boom so strong that some are convinced it will end in tears.
“This is going to be short-lived. It’s very appropriate to call this a bubble,” Bank of America analyst Timna Tanners told CNN Business, using the “b-word” that equity analysts from major banks typically avoid.
After bottoming out around $460 last year, US benchmark hot-rolled coil steel prices are now sitting at around $1,500 a ton, a record high that is nearly triple the 20-year average.
Steel stocks are on fire. US Steel (crashed to a record low last March amid bankruptcy fears, has skyrocketed 200% in just 12 months. Nucor ( ) has spiked 76% this year alone.), which
While “scarcity and panic” are lifting steel prices and stocks today, Tanners predicted a painful reversal as supply catches up with what she described as unimpressive demand.
“We expect this will correct — and often when it corrects, it over-corrects,” said Tanners, a two-decade veteran of the metals industry who authored a report last week headlined “Steel stocks in a bubble.”
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