Steel stocks have been a rollercoaster in 2022, but the latest news out of the US and China heralds the potential for another breakout on rising infrastructure spending. Though global steel demand will rise only slightly this year after seeing strong gains in 2021, 2023 is likely to be a year of resurgence.
Following US Steel Corp.’s record first quarter, optimism is high among steel producers with mills in America – set to get exclusive access to hundreds of billions of dollars in stimulus spending over the next several years. China will also be launching a wave of industrial stimulus in the coming months, focused on reviving their economy after months of restrictive COVID lockdowns.
Related ETFs & Stocks: VanEck Steel ETF (SLX), Materials Select Sector SPDR Fund (XLB), United States Steel Corporation (X)
In April, the World Steel Association forecast steel demand would grow by 0.4% in 2022 to reach 1,840.2 million tonnes after increasing by 2.7% in 2021. In 2023 steel demand is expected to accelerate further, growing by 2.2% to reach 1,881.4 million tonnes.
Last month, The Biden administration gave a boost to steel mills operating in the US, mandating that American steel be used in infrastructure projects receiving federal funding. More specifically, guidance provided by the White House required 100% US-made iron, steel, and construction materials to be used, as well as at least 55% other manufactured products by cost. Those requirements went into effect on May 14 and Barron’s reports they should provide US steel plants with about 10 million tons of new steel demand from government-led projects – equivalent to roughly 10% of total US demand.
Six months after the signing of President Biden’s $1 trillion infrastructure package, the government said earlier this week that there are 4,300 projects underway with more than $110 billion in funding announced.
Late last month, US Steel Corp. predicted a “best-ever” second quarter on tap, due to growing steel demand from automakers to construction firms. That came after sales for the quarter surged 43% to $5.23 billion, earning the firm a record quarterly profit of $882 million.
Bloomberg notes the company’s upbeat tone echoes Nucor Corp., Cleveland-Cliffs Inc. and Steel Dynamics, which all expressed optimistic sentiments about the market after reporting stronger-than-expected demand.
US Industrial production rose 1.1% MoM in April, bouncing back from a smaller gain of 0.9% in the prior month. Median forecasts in a Bloomberg survey of economists called for an 0.5% gain. On a YoY basis, industrial production increased 6.4%. Capacity utilization at factories increased…
To read the complete Intelligence Briefing, current All-Access clients, SIGN IN All-Access clients receive the full-spectrum of MRP’s research, including daily investment insights and unlimited use of our online research archive. For a free trial of MRP’s All-Access membership, or to save 50% on your first year by signing up now, CLICK HERE
To read the complete Intelligence Briefing, current All-Access clients, SIGN IN
All-Access clients receive the full-spectrum of MRP’s research, including daily investment insights and unlimited use of our online research archive. For a free trial of MRP’s All-Access membership, or to save 50% on your first year by signing up now, CLICK HERE