Macquarie upgraded several U.S. steel producers, saying that demand for steel should improve, while the recent downturn in the stocks has created a buying opportunity. The firm upgraded AK Steel (AKS) and Steel Dynamics (STLD) to Outperform from Neutral, and it raised its rating on Nucor (NUE) and U.S. Steel (X) to Neutral from Underperform.

DEMAND: Based on earnings reports from industrial companies, there is evidence that demand for steel is rebounding, while the increase is “sustainable,” according to Macquarie analyst Aldo Mazzaferro.

AK STEEL: The company’s first quarter revenue should increase 2.7% versus Q4 results, predicted the analyst, who increased his operating profit per ton forecast for the company by 9%. AK Steel should also benefit from its high leverage and 60% exposure to the North American auto market which is “leveling off at high levels,” according to Mazzaferro. He raised his 2017 EPS estimate for the company by 70% and increased his price target on the name to $8.10.

STEEL DYNAMICS: The company noted that demand in several of its end markets had improved in Q1, as its “overall steel utilization rate” rose to 95% from 81% during the previous quarter, the analyst stated. Compared with Nucor, Steel Dynamics is “growing faster, more profitable, and less expensive,” according to Mazzaferro. He increased his 2017 EPS estimate for Steel Dynamics to $3.60 from $3 and set a $4 price target on the shares.

NUCOR: Boosted by stronger demand, the company’s steel mill operating rates reached 89% last quarter, up from 74% in the previous quarter, according to the analyst. The company should also benefit from an increase of over $200 per ton in tubing prices this quarter, Mazzaferro. wrote. He raised his price target on the shares to $62 from $55, saying that the stock “remains relatively expensive versus other steel mills.”

U.S. STEEL: The company “has good exposure” to the energy and industrial sectors, where demand is improving, the analyst stated. Moreover, the company’s European operations should benefit from a weak currency and the economic recovery there, according to Mazzaferro. He raised his 2017 EPS estimate for the company to $2.70 from $1.65 and increased his price target on the name to $30 from $23.