Investing.com -- Morgan Stanley upgraded Steel Dynamics (NASDAQ: STLD ) Inc to "Overweight" amid tariff driven price surges, and the completion of its capital expenditure cycle and expectations of higher free cash flow and shareholder returns.

Steel prices have surged following the U.S. administration’s reimplementation of 25% tariffs on steel imports, with hot-rolled coil prices jumping from $690 per ton to $910 per ton in a month.

Morgan Stanley raised its 2025 steel price forecasts, projecting an annual average of $826 per ton, up 10% from prior estimates.

While tariffs have driven near-term gains, the firm expects steel prices to pull back in the second half of 2025 due to slowing GDP growth and increased imports.

Brokerage sees hot-rolled coil prices declining to $750 per ton in the fourth quarter as widening import arbitrage pressures domestic prices.

Morgan Stanley expects Steel Dynamics’ capital expenditures to drop from an annual average of $1.5 billion over the past three years to $1 billion in 2025 and $600 million in 2026, boosting free cash flow to $1.8 billion in 2026.

The firm believes the completion of major investments positions STLD to increase dividends and buybacks, supporting its upgrade to "Overweight."