Top Steel Stocks to Watch in Q2 2023: Prices and Market Insights

Champion Iron, Reliance Steel, and Steel Dynamics are spearheading revenue growth in the steel sector despite economic headwinds.

In the face of high interest rates and recession concerns dampening steel demand, industry leaders such as Champion Iron Ltd., Reliance Steel & Aluminum Co., and Steel Dynamics Inc. continue to outperform their peers in revenue growth. This resilience highlights the sector's gradual recovery from the disruptions caused by the Covid-19 pandemic.

Over the past year, steel stocks have marginally outperformed the broader market. The VanEck Vectors Steel ETF (SLX), a key industry benchmark, increased by 2% in the last 12 months, while the Russell 1000 Index remained flat during the same period.

Here, we analyze the top three steel stocks in three categories as of May 1, 2023: best value, fastest growth, and strongest performance.

Best Value Steel Stocks

These stocks exhibit the lowest trailing 12-month price-to-earnings (P/E) ratios, indicating investors pay less for each dollar of profit. Low P/E ratios often signal undervalued opportunities with potential for dividend returns and share buybacks.

• ArcelorMittal SA: Headquartered in Luxembourg, ArcelorMittal operates steel, iron ore, and coal mining facilities worldwide. The company completed a share buyback of over 60 million shares in April 2023, enhancing shareholder value.
• Stelco Holdings Inc.: A Canadian steel producer supplying sheet products to construction, automotive, and energy sectors. Stelco trades OTC in the U.S. under ticker STZHF.
• Algoma Steel Group: This Canadian integrated steel producer serves automotive, energy, manufacturing, construction, and defense industries. Despite a Q3 2023 loss of $70 million due to lower production, Algoma maintains shareholder returns with a $0.05 quarterly dividend paid in March.

Fastest Growing Steel Stocks

Ranked by a growth model balancing year-over-year quarterly revenue and earnings-per-share (EPS) growth, these companies demonstrate robust operational expansion. Companies with extreme growth rates over 1,000% were excluded to avoid distortions.

• Champion Iron Ltd.: Operating iron ore mines in Eastern Canada, Champion Iron exports concentrates globally. It trades OTC in the U.S. under ticker CIAFF.
• Reliance Steel & Aluminum Co.: A diversified metals service provider distributing roughly 100,000 metal products. In May 2023, Reliance Steel acquired Southern Steel Supply LLC, expanding its market reach. Despite a 27% net income decline in Q1 2023 due to lower metal prices, the company remains a growth leader.
• Steel Dynamics Inc.: A major carbon-steel producer and metal recycler, Steel Dynamics offers flat-rolled steel, structural beams, and steel bars across multiple industries.

Steel Stocks With the Most Momentum

These stocks delivered the highest total returns over the past 12 months, reflecting strong investor confidence and market performance.

• Olympic Steel Inc.: Producing steel plates, tin plates, and coated flat-rolled sheets, Olympic Steel expanded in January 2023 by acquiring Metal-Fab Inc., a filtration products manufacturer. Following its 2022 earnings report showing 11% revenue growth, the stock surged over $11.
• POSCO Holdings Inc.: A South Korean steel giant offering iron and steel products alongside consulting and business services.
• Reliance Steel & Aluminum Co.: Refer to the description above.

Impact of U.S. Tariffs on Steel Stocks

Since March 2018, U.S. steel imports have faced a 25% tariff under Section 232 of the Trade Expansion Act, aimed at protecting domestic producers from cheaper foreign steel. Supporters credit the tariffs with boosting domestic mill utilization from 70% in 2018 to 85% in 2022. Critics argue the tariffs raised steel prices and strained manufacturers in construction and automotive sectors.

Financially, tariffs have benefited U.S. steel companies like U.S. Steel, Nucor Corporation, and Steel Dynamics, all reporting record profits since tariff imposition. The VanEck Steel ETF has gained 50% since March 2018, matching the Dow Jones Industrial Average's performance over the same timeframe.

Advantages of Investing in Steel Stocks

Infrastructure Spending Boost: Steel stocks are positioned to benefit from the U.S. government's $1.2 trillion infrastructure investment passed in November 2021. This plan prioritizes American steel for upgrading roads, bridges, and railways over five years, enhancing demand for domestic producers.

Attractive Valuations: As of May 2023, steel stocks trade below historical averages. For example, Nucor’s share price fell 5% over the past year, with a P/E ratio of 5.7 compared to its 2020 peak near 40. U.S. Steel shares declined 28% but increased cash reserves, positioning both companies for future growth and expansion.

Discover the latest news and current events in Markets News as of 09-05-2023. The article titled " Top Steel Stocks to Watch in Q2 2023: Prices and Market Insights " provides you with the most relevant and reliable information in the Markets News field. Each news piece is thoroughly analyzed to deliver valuable insights to our readers.

The information in " Top Steel Stocks to Watch in Q2 2023: Prices and Market Insights " helps you make better-informed decisions within the Markets News category. Our news articles are continuously updated and adhere to journalistic standards.