The bear case on steel stocks like US Steel (X) and AK Steel (AKS) has been that lower iron-ore prices would ultimately lead to lower steel prices. That hasn’t happened yet, butJPMorgan’s Michael Gambardella and team haven’t given up hope.

They explain why they favor Steel Dynamics(STLD) and Nucor (NUE) over US Steel and AK Steel:

For the steel companies, we continue to believe that lower raw material costs and increased imports will pressure sheet prices lower. Given this cautious stance, we continue to prefer Nucor and Steel Dynamics (over AK Steel and US Steel) given their variable cost structures and significant leverage to an eventual recovery in non-residential construction.

Count Axiom Capital’s Gordon Johnson among those that agree it’s just a matter of time before steel prices fall and drag down US Steel’s stock with them:

…a very interesting American Metal Market (AMM) article from this morning suggests, in addition to the above, HRC volumes will be weak in C4Q14 (which would weigh negatively on US Steel’s margins structure). We believe US Steel’s stock is currently discounting HRC prices at ~$670/ton in 2014 & 2015. [The article says steel prices have fallen to $640 a ton. Ed.]

US Steel has dropped 0.9% to $33.33 at 1:35 p.m. today, while AK Steel has gained 1% to $6.36, Nucor has advanced 0.4% to $50.12 and Steel Dynamics is unchanged at $21.06.