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Steel Stocks Will Build on Construction Gains: Analyst

As construction goes, so will go the steel industry, Wells Fargo analyst Sam Dubinsky told CNBC Tuesday.

Construction is "the most important market for steel" and is "showing signs of life" for the first time since the 2008 recession, he said.

While the current low price of natural gas helps steel companies keep their costs down, the biggest problem they face is oversupply, Dubinsky said.

"If you believe construction is coming back, we think the sector could be headed for cyclical expansion next year because supply headwinds will abate. Construction will sop up that incremental demand," he said.

That should also help steel company stocks.

That's why Dubinsky is "turning more positive on the group for next year," he said.

When will steel prices rise again? When utilization rates are in excess of 80 percent, he said. Currently, utilization is in "the high 70s," thanks to the need for steel in automobiles, equipment, and energy, which he said are near pre-recession levels.

His picks in what he calls an "incredibly volatile" sector? Dubinsky likes Nucor because it has a diverse product line, pays a dividend and is "one of the safer steel names."

He also likes AK Steel, calling it "a turnaround story."

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Trader disclosure: On April 3, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian is long AAPL CALLS; Pete Najarian is long AAPL; Pete Najarian is long BAC CALLS; Pete Najarian is long C ; Pete Najarian is long JPM CALLS; Pete Najarian is long MS; Pete Najarian is long C; Pete Najarian is long YHOO; Pete Najarian is long SBUX CALLS ; Pete Najarian is long COP ; Pete Najarian is long PEP; Simon Baker is long JPM; Simon Baker is long GDX; Simon Baker is long MS; Simon Baker is long GLD; Simon Baker is long XLU; Simon Baker is long XLF; Simon Baker is long IBM; Simon Baker is long WMT; Simon Baker is long JOY; Simon Baker is long GMCR; Simon Baker is long ADSK; Simon Baker is long FCX; Simon Baker is long DELL; Simon Baker is long IBM; Simon Baker is long NKE' Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long NUE; Guy Adami is long BTU; Guy Adami is long MSFT; Josh Brown is long AAPL; Josh Brown is long LULU; Josh Brown is long SIRI

For Dan Dicker
Dan Dicker is long ECA
Dan Dicker is long SD
Dan Dicker is long XOM
Dan Dicker is long OIL

For Charlie Denson
Nothing to disclose

For MacNeil Curry
Nothing to disclose

For Stephen Gengaro
Sterne, Agee & Leach, Inc. makes a market in the shares of SLB
Sterne, Agee & Leach, Inc. has, over the past 12 months, managed or co-managed a public securities offering or provided other investment banking services for SLB
Sterne, Agee & Leach, Inc. received compensation for products or services other than investment banking services in the past 12 months from SLB
The Sterne Agee analyst who has active coverage on this company owns a position in SLB
Sterne, Agee & Leach, Inc. or its affiliates beneficially own 1% or more of any class of common equity securities of SLB

For Sam Dubinsky
Wells Fargo Securities, LLC maintains a market in the common stock of STLD
Wells Fargo Securities, LLC maintains a market in the common stock of NUE
Wells Fargo Securities, LLC maintains a market in the common stock of X
Wells Fargo Securities, LLC or its affiliates managed or comanaged a public offering of securities for X
Wells Fargo Securities, LLC or its affiliates managed or comanaged a public offering of securities AKS
Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from X
Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from NUE
Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from STLD
Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from X
Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from AKS
Wells Fargo Securities, LLC and/or its affiliates, have beneficial ownership of 1% or more of any class of the common stock of X
United States Steel Corporation, AK Steel Holding Corporation currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided investment banking services to United States Steel Corporation, AK Steel Holding Corporation.
United States Steel Corporation, Steel Dynamics, Inc., Nucor Corporation currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to United States Steel Corporation, Steel Dynamics, Inc., Nucor Corporation.
Steel Dynamics, Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided nonsecurities services to Steel Dynamics, Inc.
Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from X
Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from NUE
Wells Fargo Securities, LLC or its affiliates may have a significant financial interest in X
Wells Fargo Securities, LLC or its affiliates may have a significant financial interest in NUE
Wells Fargo Securities, LLC or its affiliates may have a significant financial interest in STLD
Wells Fargo Securities, LLC or its affiliates may have a significant financial interest in AKS
Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from an affiliate of AKS
Wells Fargo Securities, LLC or its affiliates managed or co-managed a public offering of securities for an affiliate in the last 12 months from AKS
Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from an affiliate in the past 12 months of AKS



CNBC.com with wires.

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AKS
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