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Steel Industry Firing on All Cylinders
The steel industry has pulled off a strong comeback after bearing the brunt of the pandemic last year, thanks to a strong revival in demand and skyrocketing steel prices.
Coronavirus-induced demand destruction wreaked havoc on the steel industry for much of the first half of last year. However, strong pent-up demand and zooming steel prices have pulled the industry out of its pandemic-induced slumber. Steel demand has picked up with the resumption of operations across major sectors such as automotive, construction and machinery following easing of lockdowns and restrictions across the word.
Notably, the WSA envisions overall steel demand to rise 5.8% in 2021 to 1,874 Mt after edging down 0.2% last year. The forecast assumes a steady progress on vaccinations enabling a gradual return to normality across major steel-consuming nations and that the ongoing second or third waves of coronavirus infections will stabilize in the second quarter. The trade body expects steel demand to increase 3% in China this year.
Meanwhile, steel prices have witnessed an unprecedented surge this year underpinned by strong underlying supply and demand fundamentals. U.S. steel prices are on a tear on an upturn in demand, tight supply, higher raw material costs and low steel supply-chain inventories. The benchmark hot-rolled coil prices have shot up nearly four-fold from the lows witnessed in August 2020. A key reason behind the spurt in U.S. steel prices is the demand-supply imbalance. China’s steel prices have also spiked so far this year on the back of strong domestic demand. Moreover, global steel prices are moving up on higher demand and supply constraints. Higher prices bode well for the profitability of steel companies.
Steel Stocks Worth Considering
A few stocks currently worth a look in the steel space are ArcelorMittal MT, Nucor Corporation NUE, United States Steel Corporation X, Steel Dynamics, Inc. STLD and Schnitzer Steel Industries, Inc. SCHN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ArcelorMittal has expected earnings growth rate of a whopping 1,163.6% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 20.3% upward over the last 60 days. The stock has also rallied roughly 178% over a year.
Nucor has expected earnings growth rate of 344.9% for the current year. The consensus estimate for the current year has been revised 47.9% upward over the last 60 days. It has seen its shares shoot up around 132% over the past year.
U.S. Steel has expected earnings growth rate of 305.1% for the current year. The Zacks Consensus Estimate for the current year has been revised 130.3% upward over the last 60 days. The stock has also shot up roughly 210% over the past year.
Steel Dynamics has expected earnings growth rate of 286.6% for the current year. The consensus estimate for the current year has been revised 47.9% upward over the last 60 days. The stock has also surged roughly 124% over the past year.
Schnitzer Steel has expected earnings growth rate of 1,144.2% for the current fiscal year. The consensus estimate for the current fiscal has been revised 10.3% upward over the last 60 days. The stock has also surged around 188% over a year.