Sector Snap: Steel shares decline

Michael Willemse, an analyst with CIBC World Markets Corp., wrote in a client note that current share prices already reflect normalized profitability levels.

"Although we continue to believe that overall steel prices will likely decline for the remainder of 2008, further downside pressure for steel-related equities should be limited," he wrote.

Willemse upgraded U.S. Steel to "Sector Outperformer" from "Sector Performer."

Meanwhile, ArcelorMittal, the world's largest steel producer, said it believes steel prices will continue to remain "structurally strong" due to cost increases in raw materials and steel equipment.

ArcelorMittal said it will generally maintain its third-quarter pricing levels globally into the fourth quarter. It is currently negotiating 2009 contracts for automotive, packaging and home appliance customers, and is "making good progress in agreeing substantial price increases."

AK Steel Holding Corp. shares declined $2.80, or 5.8 percent, to $45.12. The stock has traded between $34.20 and $73.07 over the past year.

ArcelorMittal shares dropped $3.21, or 4.5 percent, to $68.70. The stock has traded between $55.53 and $104.77 in the past year.

Shares of U.S. Steel slipped $1.18 to $118.27 in midday trading. The stock has traded in a range of $85.05 to $196 over the past year.