HRC resumes its uptrend; Goldman Sachs reiterates Buy rating on Nucor Corp.

Overview

This report is Goldman Sachs' commodity pricing comment on the Americas steel industry and Nucor Corp. The key backdrop is that HRC prices resumed rising after remaining flat for 17 consecutive days, while steel equities had already declined significantly during this period and returned to a valuation range closer to historical averages. The report argues that although the HRC forward curve remains relatively muted, and recent declines in lead times and rising import data may weigh on market expectations, spot prices, sheet lead times, and scrap spreads collectively indicate that supply, demand, and margins remain supported.

Core views

Goldman Sachs' core view is that steel equities may be cheaper than their headline valuations suggest because the 2027 HRC price used by market consensus is below Goldman Sachs' forecast, the forward curve, and the spot price; sheet products remain tight, HRC lead times have declined but remain above historical averages, and CRC, HDG, and plate lead times and price momentum remain strong. At the same time, the HRC-to-shredded-scrap spread is at a more than four-year high, meaning that even if mid-cycle HRC prices return to consensus levels, structural margins could remain above the historical median. Based on these factors, Goldman Sachs reiterates its Buy rating on Nucor Corp.

Analysis framework

The report assesses U.S. steel industry supply, demand, and earnings prospects using multiple indicators, including commodity prices, steel equity performance, the forward curve, lead times, inventories, and scrap spreads, and maps these industry variables to Nucor Corp.'s valuation and risk/reward. The target price is derived using average FY2026-FY2028 EBITDA and a 9.2x EV/EBITDA multiple.

Methodology notes

• Valuation methodsEV/EBITDA Target Price Method

  Derive the 12-month target price by multiplying average FY2026-FY2028 EBITDA by a 9.2x EV/EBITDA multiple.

  The report explicitly states that Nucor Corp.'s 12-month target price of $274 is based on a 9.2x EV/EBITDA multiple applied to average FY2026-FY2028 EBITDA.

• Industry CycleCommodity Price and Lead-Time Analysis

  Use HRC prices, the forward curve, sheet lead times, inventories, and scrap spreads to assess steel industry supply, demand, and margins.

  Renewed HRC gains, multi-year highs in lead times for other sheet products, inventories near historical lows, and a widening HRC/scrap spread are the main evidence supporting the report's view that industry fundamentals remain supported.

• Factor FrameworkGS Factor Profile

  Goldman Sachs compares stock characteristics with the market and industry peers across four attributes: Growth, Financial Returns, Multiple, and Integrated.

  The report discloses the definition and calculation approach of the GS Factor Profile, but the investment conclusion in the main text focuses primarily on commodity prices, valuation, and steel fundamentals.

• Corporate Event FrameworkM&A Rank

  Goldman Sachs uses an M&A rank from 1 to 3 to assess the probability that a company becomes an acquisition target and incorporates it into the target price in certain circumstances.

  The report discloses the M&A Rank framework, where 1 represents high probability, 2 represents medium probability, and 3 represents low probability; the main text does not indicate that this framework was a core driver of the change in NUE's target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Nucor Corp. (NUE)

  Core covered asset; Goldman Sachs reiterates its Buy rating and assigns a 12-month target price of $274.

  Strengths

  Benefits from recovering HRC prices, tight sheet supply and demand, wider scrap spreads, and improved risk/reward following the decline in steel equity valuations.

  Weaknesses

  The HRC forward curve remains muted, HRC lead times have recently declined from 7.7 weeks to 7.3 weeks, and rising import data may affect market confidence in the durability of price gains.

  Comparison

  Compared with forward valuation based on the consensus HRC price of $953/ton, steel equities may appear cheaper when valued using spot prices, the forward curve, or the Goldman Sachs forecast.

  Risks

  Higher-than-expected scrap costs, tariff reductions, increased U.S. domestic capacity, and slower-than-expected economic growth leading to weaker steel demand.

• HRC

  Key commodity price variable; its +$15/ton weekly gain renewed investor focus on the steel equity thesis.

  Strengths

  The spot price is above the consensus 2027 HRC price, and renewed price gains indicate that fundamentals remain supported.

  Weaknesses

  The forward curve remains relatively muted, and lead times have recently declined.

  Comparison

  Visible Alpha consensus 2027 HRC pricing of $953/ton is 17% below the spot price.

  Risks

  Increased imports, further reductions in lead times, or weaker demand could pressure HRC prices.

• Steel equities

  Industry equity basket; declined during the period of sideways HRC prices and experienced a valuation reset.

  Strengths

  Valuations have returned close to the historical FY2 EV/EBITDA average, and risk/reward improves if prices and margins remain strong.

  Weaknesses

  The market is sensitive to whether commodity prices have peaked, and share prices have demonstrated high elasticity to sideways price movements.

  Comparison

  The report believes valuation based on consensus price assumptions may overstate the actual valuation pressure because consensus prices are below spot prices, the forward curve, and the Goldman Sachs forecast.

  Risks

  Falling steel prices, capacity expansion, tariff changes, and slowing macroeconomic demand.

Key data

• Weekly HRC price change+$15/ton WoWThe report calls this the most important pricing news of the week.
• Steel equity performanceApproximately -19%Steel equities fell approximately 19% while HRC remained flat for 17 consecutive days.
• Visible Alpha consensus 2027 HRC price$953/ton5% below the Goldman Sachs forecast, 9% below the forward curve, and 17% below the spot price.
• Price changes over the past five weeksHRC/CRC/HDG/Plate +4%/+6%/+7%/+6%, respectively; Rebar -1%Sheet price momentum was stronger than that of rebar.
• HRC lead time7.3 weeksDown 0.4 weeks from 7.7 weeks but still above the historical average of 4.8 weeks.
• HRC/Shredded Scrap spreadApproximately $770/tonThe widest since May 2022.
• Historical median scrap spreadApproximately $448/tonThe measurement period is June 2015 through June 2025.
• Scrap spread under the consensus mid-cycle scenario$571/tonEven if HRC prices stabilize at the consensus level of $953/ton, the scrap spread would remain approximately 27% above its historical median.
• Nucor Corp. target price$274Based on a 9.2x EV/EBITDA multiple applied to average FY2026-FY2028 EBITDA.
• Nucor Corp. currently disclosed price$222.28Listed in the report as Nucor Corp. (Buy, $222.28).

Impact & implications

If HRC prices continue to rise, sheet lead times remain elevated, and scrap spreads stay strong, market expectations for steel company earnings could be revised upward, leaving room for steel equity valuations to recover following the pullback. For Nucor Corp., Goldman Sachs believes the Buy rating remains supported, with the target price implying approximately 23% upside from the currently disclosed price.

Risks

• Higher-than-expected scrap costs could compress steel company margins.
• Tariff reductions could increase import competition and depress U.S. steel prices.
• Increased U.S. domestic capacity could create downward pressure on prices.
• Slower-than-expected economic growth could weaken U.S. steel demand.
• Further declines in HRC lead times or continued increases in import data could weaken market confidence in the durability of price gains.

What to watch

• Whether HRC spot prices continue to rise and whether the forward curve follows upward.
• Whether HRC lead times can remain significantly above historical averages.
• Price momentum and lead-time changes for other sheet products, including CRC, HDG, and plate.
• Whether the HRC/Shredded Scrap spread remains above its historical median.
• U.S. steel import data and the pace of new domestic capacity coming online.
• Subsequent earnings expectations for Nucor Corp., EBITDA revisions, and historical changes in the Goldman Sachs target price.