JP Morgan Previews North American Metals & Mining Earnings: Q4 Guidance and Lagging Pricing in Focus; Bullish on Carpenter Technology Corporation (CRS.US)

J.P. Morgan noted in its latest North American Metals & Mining weekly report that the metals earnings season reaches its peak this week, with a number of steel and metals companies set to report results in succession. The research report provided updated ratings and price targets for several core names, and noted that August United States Steel Corporation apparent consumption grew 7% year-over-year, but inventories and supply-demand conditions diverged markedly across different product categories. Steel & Metals Earnings Preview: Focus on Q4 Guidance and Lagging Pricing J.P. Morgan noted that several metals companies will report earnings intensively this week, among them Cleveland-Cliffs (CLF.US), which will report on October 19; Steel Dynamics (STLD.US), which will report on October 20; Carpenter Technology Corporation (CRS.US), Kaiser Aluminum Corporation (KALU.US), and Reliance (RS.US), which will report on October 22; and GrafTech (EAF.US), which will report on October 23. Key points to watch and ratings for each company are as follows: Cleveland-Cliffs (Neutral rating, price target $12): The company is expected to provide strong fourth-quarter guidance (J.P. Morgan forecasts 11% above consensus), but buy-side expectations have largely reflected this. The market will closely watch commentary on contract resets and Canadian pricing, which are key drivers behind the prior full-year EBITDA target of $3.3 billion (J.P. Morgan forecasts $2.8 billion, 14% above consensus). Steel Dynamics (Neutral rating, price target $260): Focus on execution at the aluminum business unit ADI. As the related operations are still ramping and scrap spreads have recently compressed, management is not expected to set new earnings targets for now. Carpenter Technology Corporation (Overweight rating, price target $520): First-quarter results are expected to be solid, driven by a seasonally favorable product mix, but given the currently challenging investor sentiment, visibility on structural order acceleration warrants attention. Reliance (Neutral rating, price target $400): Third-quarter results are expected to beat expectations (J.P. Morgan forecasts 9% above company guidance), and fourth-quarter guidance should also exceed market expectations (J.P. Morgan forecasts 4% above consensus), mainly driven by spot pricing leverage, market share gains, and easing seasonality. Kaiser Aluminum Corporation (Underweight rating, price target $146): Estimates indicate at least $10-15 million of metal lag benefit in the third quarter, but the fourth-quarter outlook is relatively flat due to seasonality and loose primary aluminum fundamentals. GrafTech (Underweight rating, no price target): Lagging pricing is expected to deteriorate in the third quarter despite recent price increases. Following the disappointing India anti-dumping duty, focus on progress in U.S. customer contract negotiations for fiscal 2027. Steel Apparent Consumption Strong Data in the report show that August United States Steel Corporation apparent consumption (a measure of actual demand, equal to production plus net imports) was strong, as follows: Total: Total apparent consumption rose 7% year-over-year (+614,000 tons) and was flat month-over-month. It was driven by both shipments (+6% YoY) and imports (+12% YoY). Sheet: Apparent consumption rose 7% year-over-year (+309,000 tons), likewise driven by shipments (+6%) and imports (+12%). Plate: Apparent consumption rose 9% year-over-year (+63,000 tons) and 11% month-over-month. Rebar: Apparent consumption rose 8% year-over-year (+67,000 tons), mainly driven by a surge in imports (+147%). Structural: Apparent consumption jumped 19% year-over-year (+124,000 tons), supported by both imports (+114%) and shipments (+8%). The report noted that the World Steel Association forecasts United States Steel Corporation demand growth of 2.0% in 2026, slowing to 1.5% in 2027, with growth driven mainly by non-residential projects such as data centers and energy infrastructure. On inventories, September service center sheet inventories edged up to 45.9 shipping days (prior 44.2, year-ago 54.3); plate inventories fell sharply to 40.5 shipping days, the lowest since records began in 2018 (prior 45.5, year-ago 58.7). Aluminum Sector: Used Beverage Can Spread Risk Skewed to the Downside In the downstream aluminum sector, J.P. Morgan believes the risk/reward on the used beverage can (UBC) spread is skewed to the downside, due to loose primary aluminum fundamentals and growing UBC demand. The Oswego plant restarted in June, ADI targets an exit rate of about 90% in fiscal 2026, and Novelis' Bay Minette project has begun rampingall of which imply increased demand for U.S.-made can sheet and, in turn, for UBC feedstock. In addition, if Canada comes under heavy Section 232 tariff pressure (worst-case scenario), it could deal a major blow to Midwest aluminum price sentiment.