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Top 5 Picks on Strong Recovery of Global Steel Demand in 2021

The global economic recovery in 2021 is likely to be faster than expected per several economic and financial research agencies. Unprecedented fiscal and monetary stimulus provided by almost all nations, deployment of COVID-19 vaccines and the reopening of businesses resulted in a broad-based recovery and the steel industry also benefited.

The pandemic-induced stimulus injected globally helped in reviving activities in major steel-consuming industries like construction, automative (cars, trucks, aviation, shipbuilding, and rail), machinery, metal products, electrical equipment and domestic appliances. Consequently, the global steel industry is witnessing a strong rebound.

Global Steel Industry Expanding

On Apr 15, the World Steel Association (worldsteel) forecast that global steel demand will climb 5.8% in 2021 to reach 1.874 billion metric ton (mt). Demand will further grow by 2.7% in 2022 to reach 1.925 billion mt. Notably, growing demand for steel has resulted in sky-high prices of iron ore, the most important input for steel industry.

Also, worldsteel estimated that global steel demand declined a mere 0.2% in 2020 despite the outbreak of the deadly coronavirus across the world. This was mainly due to a 9.1% jump in steel demand for China in 2020 which offset a 10% contraction in the rest of the world. The earlier projection in October 2020 was for a 2.4% contraction in demand in 2020 and a 4.1% recovery in 2021 to 1.795 billion mt.

Per worldsteel Director General Edwin Basson, the industry's recovery from the pandemic-led lockdowns "has been greater and sooner than initially expected." Al Remeithi, chairman of the worldsteel economics committee said "In the coming years, steel demand will recover firmly, both in the developed and developing economies, supported by pent-up demand and governments' recovery program."

U.S. Steel Market Thriving

The price of U.S.-made steel has soared in 2021 buoyed by the nationwide deployment of the COVID-19 vaccine and a strong rebound of the economy supported by a faster-than-expected reopening. Moreover, tariffs imposed by the Trump administration on low-cost imported steel and consolidation among industry players to revive the sagging industry have resulted in a jump in steel prices.

The price of the US Midwest Domestic Hot-Rolled Coil Steel Future reached an all-time high of $1,680 per mt and thereafter reduced 1.3% to settle at $1,640 per mt on Jun 7. On May 27, the price of domestic Cold-Rolled Coil Steel Future reached an all-time high of $1,890 per mt.

The U.S. manufacturing and construction sectors did well in the pandemic-ridden 2020 and are maintaining their momentum this year. Demand in the auto sector remained healthy. Moreover, the proposed infrastructure development plan of more than $1 trillion by the Biden administration will drive demand for steel products going forward.

Our Top Picks

We have narrowed down our search to five steel producers that have rallied more than 30% in the past three months. These stocks have a strong growth potential for the rest of 2021 and have witnessed robust earnings estimate revisions within the last 30 days. Each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past three months.

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Zacks Investment Research

Image Source: Zacks Investment Research

Nucor Corp. NUE is a leading producer of structural steel, steel bars, steel joists, steel deck and cold-finished bars in the United States. It operates through three segments: Steel Mills, Steel Products, and Raw Materials.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 3.6% over the last 30 days. The stock has soared 63% in the past three months.

ArcelorMittal MT is the world’s leading steel and mining company that owns and operates steel manufacturing and mining facilities in Europe, North and South America, Asia, and Africa.

The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 10.5% over the last 30 days. The stock price has surged 30.8% in the past three months.

Schnitzer Steel Industries Inc. SCHN recycles ferrous and nonferrous scrap metals, and manufactures finished steel products worldwide. It operates in two segments, Auto and Metals Recycling, and Cascade Steel and Scrap.

The company has an expected earnings growth rate of more than 100% for the current year (ending August 2021). The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the last 30 days. The stock price has appreciated 32.9% in the past three months.

Steel Dynamics Inc. STLD operates as a steel producer and metal recycler in the United States. It operates through three segments: Steel Operations, Metals Recycling Operations, and Steel Fabrication Operations.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the last 30 days. The stock price has climbed 36.3% in the past three months.

TimkenSteel Corp. TMST manufactures and sells alloy steel, and carbon and micro-alloy steel products in the United States and internationally. It operates in the SBQ Steel Bar, Seamless Mechanical Steel Tubes, and Billets; and Value-added Precision Products and Services segments.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 46.9% over the last 30 days. The stock price has jumped 39.9% in the past three months.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

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Steel Dynamics, Inc. (STLD) : Free Stock Analysis Report

ArcelorMittal (MT) : Free Stock Analysis Report

Nucor Corporation (NUE) : Free Stock Analysis Report

Schnitzer Steel Industries, Inc. (SCHN) : Free Stock Analysis Report

Timken Steel Corporation (TMST) : Free Stock Analysis Report

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