Morgan Stanley

Steel management teams across the board guided to a stronger second half.

We see upside to pricing and volumes as last year’s import orders are finally absorbed by the market. Trade cases on coated sheet, cold-rolled coil (CRC) and a potential new case on hot-rolled coil (HRC) should serve as near-term deterrents for more imports.

A second flat-rolled trade case was filed in as many months, marking an increased push by domestic steel makers to fend off “dumped” steel. The new case covers 65% of CRC imports and alleges duties of up to 320%. While we will not get a sense of the long-term implications of these cases until the duty margins are set, in the short term, the process should deter buyers from importing steel. Duties are retroactive to the Department of Commerce’s preliminary ruling, usually a few months into the case, or earlier if critical circumstances are found, which makes importing a risky proposition.

AK Steel Holding (ticker: AKS ) identified autos as an area of strong growth, with sales continuing at a near-record clip. Management also noted that housing starts were at a seven-year high. The company also believes that specialty steel products, particularly electrical steel products, could be an area of growth in coming quarters. As housing starts continue to pick up and energy-efficiency standards begin to take effect, demand for these products should continue to increase.

Similar to their peers, AK Steel applauded the recent trade case filing for cold-rolled products. Management still expects a hot-rolled case to be filed in the second half, providing additional price support for the domestic steel industry.

We are revising our AK Steel earnings estimates post second-quarter results. Our third-quarter earnings-per-share estimate for a loss of 22 cents compares with the consensus estimate for a loss of 20 cents. Our 2015 EPS estimate rises to a loss of 85 cents [from a loss of 94 cents] versus the consensus estimate for a loss of 90 cents, and our 2016 EPS estimate rises to a loss of 35 cents [from a loss of 50 cents] versus the consensus estimate for earnings of 20 cents.

Cliffs Natural Resources ( CLF ) revised their full-year sales and production guidance down by 1.5 million tons to 19 million total tons of iron-ore pellets. Persistently low utilization rates continue to hinder demand from Cliffs’ U.S. customers, although management alluded to some upside in the second half.

Cliffs management maintained overall selling, general and administrative (SG&A) costs and capital-expenditure guidance, although they noted that $25 million of the $100 million-$125 million capital-expenditure guidance was related to the coal assets. If Cliffs is able to complete a sale of the coal assets, that portion will come out of capital expenditures for the year. The company expects working-capital usage to reverse in the second half, and should become a source of cash as they continue to manage inventory.

We are revising our Cliffs EPS estimates post second-quarter results. Our third-quarter EPS estimate for a loss of 22 cents is above the consensus estimate for a loss of 25 cents. Our 2015 EPS estimate falls to a loss of 72 cents [from a loss of 13 cents] versus the consensus estimate for a loss of 52 cents, and our 2016 EPS estimate falls to a loss of 23 cents [from earnings of 24 cents] versus the consensus estimate for a loss of 43 cents.

United States Steel ( X ) guided towards an incremental $250 million in Carnegie Way [the company’s shareholder-value-creation strategy] benefits in the second half from projects completed during the second quarter. Although management did not divulge a specific number, they expect to achieve additional savings in the back half of the year as a result of ongoing projects. The total from 2015 Carnegie Way benefits now stands at $590 million.

U.S. Steel management remains optimistic regarding the recent trade case for CRC products filed on July 28. In addition to the original filing for corrosion-resistant steel earlier in the second quarter, positive rulings by the United States International Trade Commission (USITC) and the Department of Commerce in the back half of the year should continue to support domestic steel prices.

We are revising our U.S. Steel EPS estimates post second-quarter results. Our third-quarter EPS estimate of 10 cents is above the consensus estimate for a loss of seven cents. Our 2015 EPS estimate rises to 10 cents [from a loss of 11 cents] versus the consensus estimate for a loss of 60 cents, and our 2016 EPS estimate falls to $3.50 [from $3.68] versus the consensus estimate for $1.04.