Xiaomo looks ahead to North American metal mining financial reports: Q4 guidelines and lagging pricing focus, optimistic about Carpenter Technology (CRS.US)

The Zhitong Finance App learned that J.P. Morgan Chase pointed out in the newly released North American Metals and Mining Weekly Report that the earnings season for metal companies reached a climax this week, and many steel and metal companies will announce their results one after another. The research report gave the latest ratings and target prices for a number of core standards, and pointed out that in August, the apparent consumption of steel in the US increased 7% year on year, but there was a clear differentiation between inventory and supply and demand for different types.

Steel and Metals Company Earnings Forecast: Focus on Q4 Guidelines and Lagging Pricing

J.P. Morgan Chase pointed out that several metals companies will release financial reports intensively this week. Among them, Cleveland Cliff (CLF.US) will release financial reports on October 19, Steel Dynamics (STLD.US) will release earnings on October 20, Carpenter Technology (CRS.US), KALU.US (KALU.US), and Reliance (RS.US) will release financial reports on October 22, and GrafTech (EAF.US) will release financial reports on October 23.

The core highlights and ratings for each company are as follows:

Cleveland Cliff (neutral rating, target price of $12): The company is expected to give strong fourth quarter guidance (J.P. Morgan's forecast is 11% higher than market consensus), but buyers' expectations have basically been reflected. The market will pay close attention to contract resets and Canadian pricing comments, which are key drivers that previously guided the $3.3 billion annual EBITDA target (J.P. Morgan predicted $2.8 billion, 14% higher than market consensus).

Steel Dynamics (neutral rating, target price $260): Focus on ADI's implementation in the aluminum business unit. As related businesses are still climbing and scrap price spreads have been compressed recently, management is not expected to propose new profit targets for the time being.

Carpenter Technology (additional rating, target price of $520): Driven by a better seasonal product portfolio, the first fiscal quarter results are expected to be steady, but given the current challenges in investor sentiment, we need to pay attention to the visibility of accelerated structured orders.

Reliance (neutral rating, target price $400): The third quarter results are expected to exceed expectations (J.P. Morgan's forecast is 9% higher than the company's guidance), and the fourth quarter guidance will also be higher than market expectations (J.P. Morgan's forecast is 4% higher than market consensus), mainly driven by spot pricing leverage, increased market share, and weaker seasonal factors.

Caesar Aluminum (reduced holdings rating, target price $146): Estimates showed that metal earnings of at least $10 million to $15 million were lagging behind in the third quarter, but due to seasonal factors and loose fundamentals of raw aluminum, the outlook for the fourth quarter was relatively lackluster.

GrafTech (holdings reduction rating, no target price): Delayed pricing is expected to worsen in the third quarter, despite recent price increases. After India's anti-dumping duties were disappointing, keep an eye on the progress of contract negotiations for US customers in FY2027.

Strong apparent consumption of steel

According to the report data, the apparent consumption of US steel (measuring actual demand, equal to production plus net imports) showed strong performance in August. The details are as follows:

Total volume: Total apparent consumption increased 7% year on year (increase of 614,000 tons) and remained flat from month to month. It is mainly driven by both shipment volume (+6% YoY) and import volume (+12% YoY).

Plates: Apparent consumption increased 7% year over year (+309,000 tons), also driven by shipments (+6%) and imports (+12%).

Medium and heavy board: Apparent consumption increased 9% year on year (+63,000 tons) and 11% month-on-month.

Rebar: Apparent consumption increased 8% year over year (+67,000 tons), mainly driven by a surge in imports (+147%).

Steel: Apparent consumption surged 19% year on year (+124,000 tons), supported by both imports (+114%) and shipments (+8%).

According to the report, the World Steel Association predicts that US steel demand will grow by 2.0% in 2026 and slow to 1.5% in 2027. The growth is mainly driven by non-residential projects such as data centers and energy infrastructure.

In terms of inventory, the service center board inventory rebounded slightly to 45.9 delivery days in September (previous value 44.2, 54.3 in the same period last year); medium and heavy board inventory fell sharply to 40.5 delivery days, the lowest since records began in 2018 (previous value of 45.5, 58.7 in the same period last year).

Aluminum industry: the risk of scrap aluminum can price spreads is biased downward

In the downstream aluminum industry, J.P. Morgan believes that the “risk/reward” of the scrap aluminum can (UBC) price spread is biased downward. The reasons include loose fundamentals of raw aluminum and increased demand for UBC. The Oswego plant was restarted in June, ADI aims to achieve an exit rate of about 90% in the 2026 fiscal year, and Novelis' Bay Minette project has begun to climb. These all mean that demand for American cans has increased, which in turn is driving demand for UBC raw materials. Furthermore, if Canada were to be weighed down by S232 tariffs (in the worst case scenario), it could have a major impact on aluminum price sentiment in the Midwest.