2014 Candidate #2: Invest in steel?

Goldman Sachs recently upgraded the steel sector stocks. Its reasons are:

• The price of steel — the final arbiter of any debate surrounding steel’s demand — is as strong as it’s been in more than a year.
• Price of metallurgical coal, the material used to smelt iron, has grown, suggesting that steel producers are already seeing demand ramp up at least enough to merit higher smelting material prices.
• The Baltic Dry Index (of maritime shipping costs) has risen considerably since June, from a low of 806 to the current price of 1600; it had been as high as 2115 in early October. Although dry bulk vessels can carry all sorts of goods, the bulk of the recent charters and subsequent rise in charter prices has been fueled by a serious ramp-up in requests to haul iron ore… and most of it is bound for China, where steel production is already up 10% this year. Yet, it still isn’t enough. Forecasters believe demand for steel in China will grow at an annual pace of 3% to 4% through 2020, and the recent surge in iron ore charters validates the outlook. Considering the country drives 45% of the world’s demand for steel, if China’s buying a lot more steel and iron ore than usual, global supplies will be tightened.

Using T3B screener, US Steel (X, NYSE) stands out as an excellent candidate, trending nicely up since Sep. 

Like most stocks, it looks overextended for now, but definitely deserves a place in my watchlist.