Morgan Stanley cut Tokyo Steel Manufacturing to underweight from equal-weight, slashing its price target to 1,300 yen after the company missed third-quarter operating profit forecasts. The Japanese steelmaker also trimmed its full-year profit outlook to 8.2 billion yen, well below market expectations of 10 billion yen.

The downgrade stems from persistent headwinds, including soft sales volumes and pressure on metal spreads. Labor shortages in Japan’s construction sector and project delays are curbing demand, while high scrap metal prices and increased competition from blast furnace operators squeeze margins. The bank sees little near-term relief for the company's earnings.

Morgan Stanley drastically revised its long-term earnings forecasts, cutting fiscal 2027 operating profit estimates by more than half to 11 billion yen. While some smaller regional projects show stabilizing demand, the overall supply-demand environment remains weak. Investors should watch for any signs of structural improvement in Japan's construction and steel markets.