For Immediate Release
Chicago, IL – August 31, 2017 – Today, Zacks Equity Research discusses the Industry: Steel, Part 2, including Nucor Corp.(NYSE: (NUE - Free Report) – Free Report), Commercial Metals Company(NYSE: (CMC - Free Report) – Free Report), United States Steel Corp.(NYSE: (X - Free Report) – Free Report), ArcelorMittal (NYSE: (MT - Free Report) – Free Report), and Steel Dynamics Inc. (NASDAQ: (STLD - Free Report) – Free Report).
Industry: Steel, Part 2
Steel is used in every important industry ranging from energy, construction, automotive and transportation, infrastructure, packaging and machinery. Expectations of increased infrastructure-related spending in the United States have thrust steel company stocks to new highs, particularly following the November 2016 election.
There are plenty of reasons to be optimistic about the broader steel industry, both in the short and long term. Here, we discuss some of the key reasons and what investors in the steel sector can look forward to in the coming months and years.
The “Trump” Card
After being in the dumps for a major part of 2016, steel stocks got a big boost following Donald Trump’s win in November on expectations of significant infrastructure spending in a Trump administration. The president’s call for the massive infrastructure spending is likely to have a beneficial effect on the steel industry given the expected increase in steel demand, as it is a key component in many infrastructure products. Trump’s “big” spending plans have thus painted a bullish picture for steel companies.
Construction Sector Remains a Pillar of Strength
The homebuilding market remains a pillar of strength for the economy, along with the steel industry. The housing and construction sector is the largest consumer of steel, accounting for almost half of the total consumption. Positives like an improving economy, healthy job growth, low interest rates, positive consumer confidence and a tight supply situation raise optimism about the sector’s performance.
The US Architecture Billings Index (ABI), an economic indicator that provides an approximately nine to 12 month glimpse into the future of non-residential construction spending activity, has been at 50 or better for major part of the last year indicating reliable, manageable and sustainable growth in architectural activity. The American Institute of Architects (AIA) anticipates spending in the non-residential building sector to advance around 6% in 2017. Nucor Corporation (NYSE: NUE– Free Report) and Commercial Metals Company (NYSE: CMC– Free Report) are the leading steel suppliers to the non-residential construction sector.
Over the long haul, as the urban population increases worldwide, the need for steel to build skyscrapers and public transport infrastructure should see an uptrend as well. Emerging economies will continue to be major catalysts, owing to the huge amount of steel required for urbanization and industrialization. Hence, demand for steel is anticipated to remain strong in the years to come. Companies like United States Steel Corp. (NYSE: X– Free Report), ArcelorMittal (NYSE: MT– Free Report), Nucor Corporation and Steel Dynamics Inc. (NASDAQ: STLD– Free Report) would benefit from momentum in construction.
Steel to Ride on Demand from Automotive Sector
The automotive sector, which is the second largest steel consumer, is showing significant promise despite threats from other materials. Besides giving a boost to the already rising U.S. auto sales, cheap oil has backed a recovery in the European auto market. The rising sales trend is anticipated to persist on the back of falling fuel prices, low interest rates, enhanced job security, rising wages and household wealth. Moreover, the trend will be backed by improving consumer confidence, residual pent-up demand, attractive deals and vehicle launches.
Moreover, the high average age of light vehicles on U.S. roads is resulting in large replacement demand for cars as well as car parts. This will benefit auto parts manufacturers and retailers. The auto industry in Asian countries, particularly China and India, are also projected to flourish over the next five to seven years. China is the biggest and fastest growing auto market in the world in terms of number of vehicles sold.
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