“This purge of inefficient capacity can ultimately result in a leaner, more competitive, streamlined U.S. steel industry,” Merrill Lynch analysts Timna Tanners and Wilfredo Ortiz wrote in a research note. “After the dust clears from Steelmageddon, an attractive steel industry could emerge. But we would warn investors the path for the next several years of upheaval can be treacherous.”

Over the more short-term, Merrill Lynch predicts steel prices to remain roughly at their current levels, with benchmark hot rolled coil hovering around $650 to $750 per ton. However, prices will fall off to $550 to $660 per tone into 2021 and 2022.

“In the medium term, none of the U.S. steel mills look secure,” Merrill added. “While we note blast furnace operators likely lose share and shut capacity, all mills suffer from low prices when excess capacity hits the market, in our view.”

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