NEW YORK (AP) -- Shares of steel makers fell Wednesday after an analyst cautioned that the recent rise in steel prices could stall in 2011, slowing growth for the entire sector.
Deutsche Bank analyst David Martin downgraded U.S. Steel to a "Hold" rating. He noted that U.S. Steel's value has closely tracked the rise of steel prices, with steel prices rising 24 percent and U.S. Steel shares rising 25 percent during the latter part of 2010. But Martin said the rally in steel prices is unlikely to last.
According to Martin, steel price gains have exceeded costs increases and domestic U.S. steel prices are now higher than global prices. The market is due for a correction.
"The steel sector has performed modestly in recent months, with both outperformers and laggards relative to the broader market," he wrote. "We maintain a cautious view on steel due to rising costs (iron ore, met coal, scrap) and our belief that steel prices are nearing a peak."
Shares of U.S. Steel fell $2.71, or 5 percent, to $52.92 during midday trading.
Other steel makers followed suit.
Shares of AK Steel Holding Corp. fell 60 cents, or 4 percent, to $14.33. Martin had given the company a "Hold" rating in his note to clients, saying it remained vulnerable to higher costs.
Shares of Nucor Corp. fell $1.03, or 2.3 percent, to $44.01. Martin gave that company his only "Buy" rating for the steel industry in his report, saying it was well poised to weather a stagnant period for steel prices.
"The company maintains a diversified steel portfolio and a highly variable cost structure," he wrote.