STOCKWATCH UBS downgrades global steel sector to 'neutral' from 'outperform'

LONDON (AFX) - UBS Warburg has downgraded the global steel sector to 'neutral' from 'outperform' in a note to clients which argues that there is the potential for a price war among the newly consolidated major players.	    Analysts at the Swiss brokerage noted that the recent consolidation in Europe -- where Usinor, Arbed and Aceralia have announced a plan to merge -- and in Japan -- where Japan NKK and Kawasaki Steel plan to combine their operations --, is generally positive in the long term.	    They argue, however, that the consolidation has provoked fierce market share competition, which is the primary reason for their downgrade.	    The analysts said the downgrade was also prompted by the recent expansion of valuation multiples following the rally in steel shares since late March.	    "In many cases the current valuations are at, or above, the cycle average," the note said, adding that if a recovery in steel prices is delayed by excess production, consequent downward revisions will push up valuation multiples even higher.	    They have maintained their bullish stance on the North American steel market "where supply discipline is still in place and destocking is progressing smoothly".	    At 8.03 am, the basic resources sector of the Dow Jones STOXX index was down 0.21 pct at 250.31

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