Deutsche Bank Raises Price Target on U.S. Steel (X) to $220

Deutsche Bank raises its price target on U.S. Steel (NYSE: X) from $165 to $220. The firm maintains a Buy rating on the stock.

The firm said its price target on U.S. Steel, which was raised about 33%, reflects estimate changes related to "recent developments with steel supply contracts..." Deutsche believes that many steel companies have successfully re-priced supply contracts given:

• the rise in spot prices
  
• the fact that numerous steel companies are supporting the change, and
  
• the apparent flexibility in supply contracts and higher costs.

The firm feels that a new floor has been set for HRC of $800/tonne due to a dramatically tightening steel market and a drastic "upward shift in the global cost curve". Deutsche notes that these adjustments have only been made in North America, pointing out that European contracts will likely be next.

While Deutsche understands that the net financial impact of these adjustments remains unclear, the firm calls its "previous assumptions that contract prices would remain unchanged in 2H08 and 2009 is too conservative.

The firm raised its FY09 EPS estimate on U.S. Steel to $21, versus the Street consensus of $15.85.

United States Steel Corporation produces steel products.

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