Nucor Corporation (NUE), the nation’s largest recycler of steel scrap, is suffering from continued low operating rates and high-cost pig iron inventories. Moreover, a slowdown in demand from the automobile sector and increased production in China are matters of concern.

Long-term contracts, cost reduction efforts and a dominant acquisition strategy could be positives in the company’s performance in the coming quarters. Nucor’s strong balance sheet positions the company well for the long term, but the near-term headwinds in the end-markets are likely to make it difficult for the stock to outperform.

As such, we downgrade Nucor to Underperform from our previous Neutral recommendation.Zacks Investment Research