4 Top Stocks to Gain as Demand for Steel Bounces Back
The outbreak of the COVID-19 pandemic in the United States in 2020 put a halt on economic activities, thereby affecting the demand for steel. Nonetheless, following the slump early last year, steel demand has gradually regained its footing as economic activities have resumed, in turn, pushing the prices of steel higher.
Notably, a New York Times article cited that in early May, future prices for domestic hot-rolled coil (“HRC”) steel rose above $1,600 per ton for the first time. Moreover, an Argus Media article published on Jun 22 stated that its weekly domestic U.S. HRC Midwest assessment rose $3.75 per short ton to $1,682.50 per short ton ex-works, while its weekly domestic U.S. HRC south assessment increased $14.25 per short ton to $1,681 per short ton.
Steel production in the United States has witnessed a substantial uptick on the back of rising demand. Notably, the American Iron and Steel Institute stated in a report that this year through Jun 19, production of domestic raw steel is up 14.2% from the same period last year. Moreover, the report mentioned that for the week ending Jun 19, production was up 0.3% from the prior week, while as of the same day this year, capability utilization is 78.7% compared to 67.8% in the corresponding period last year.
In fact, reflective of the rising demand for steel, the manufacturing sector in the United States has been witnessing a steady expansion for 12 consecutive months. Notably, the Institute for Supply Management stated that that the manufacturing purchasing managers’ index rose to 61.2% in May, following a reading of 60.7% in April. Meanwhile, the automotive industry is expected to make a comeback this year, which should also bode well for the steel industry as automotive contributes significantly to the demand for steel. Notably, the IHS Markit estimated that in 2021, light vehicle production is set to increase 24% in North America.
Moreover, the World Steel Association (“worldsteel”) has provided a bright outlook for the global demand for steel, per its Short Range Outlook report released on Apr 15. Notably, worldsteel stated in the report that the global demand for steel is estimated to grow 5.8% in 2021, following a decline of 0.2% in 2020. Interestingly, the report further mentioned that advanced economies are expected to witness an 8.2% rise in demand for steel this year. In fact, worldsteel also stated in the report that in the United States, depending on the final form of President Joe Biden’s fiscal proposal which contains provisions for infrastructure investment, there might be upside potential for steel demand in the longer term.
4 Stocks to Invest in Now
The demand for steel has made a comeback following the slump witnessed during the early part of last year, reflected by the increased production of the metal along with the continued expansion of manufacturing activity in the United States. Hence, this seems like an opportune moment to invest in steel stocks that can make the most of this potential upswing. Notably, we have handpicked four such stocks that flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Olympic Steel, Inc. ZEUS processes and distributes metal products in the United States and internationally. The Zacks Consensus Estimate for its current-year earnings increased 51.6% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.
United States Steel Corporation X produces and sells flat-rolled and tubular steel products primarily in North America and Europe. The Zacks Consensus Estimate for its current-year earnings increased more than 100% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.
Nucor Corporation NUE manufactures and sells steel and steel products. The Zacks Consensus Estimate for its current-year earnings increased 47.9% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.
Schnitzer Steel Industries, Inc. SCHN recycles ferrous and nonferrous scrap metals; and manufactures finished steel products worldwide. The Zacks Consensus Estimate for its current-year earnings increased 10.3% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.
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