The steel industry roared back in 2021 after bearing the brunt of the pandemic last year, supported by a strong resurgence in end market demand and a rise in steel prices.
The slowdown in demand in major end-use industries has hit the steel industry for most of the first half of 2020. In particular, the pandemic dealt a new blow to the US steel industry and the US-China tariff war took place.
However, demand for steel has increased with the resumption of activity in major steel-consuming sectors such as automotive, construction and machinery, following the easing of lockdowns and restrictions globally. Steel prices have also seen an unprecedented rise this year due to increased demand in key markets, tight supply conditions and low steel inventory throughout the supply chain.
Shares of several steel companies have also skyrocketed this year due to the positive momentum of the industry. Notable among these are Commercial Metals Company CMC, EVRAZ plc EVRZF, and United States Steel Corporation X.
Steel Prices Pull Back, But Industry Stands
The recovery in major end-use industries such as construction and automotive represents a tailwind for the steel industry. The increase in industrial activities increases the demand for steel. Demand remains strong in the construction and manufacturing sectors. The automotive industry has rebounded after the pandemic-induced shutdowns following strong customer demand. Order activity in non-residential construction and equipment also remains strong. Demand for non-residential construction is approaching pre-pandemic levels. Steelmakers are also seeing improved conditions in the energy markets.
Those 3 iron and steel companies whose shares skyrocketed;
Texas-based Commercial Metals, ranked #1, profits from strong steel demand in North America, driven by increased spending in the residential and construction sector and a recovery in the manufacturing sector. It continues to witness an excellent demand for steel products in most end markets. In North America, the company profits from strong rebar demand, supported by solid construction growth as well as solid merchant bar and wire rod demand.
Commercial Metals expects earnings growth of 10.5% for fiscal 2022. The Zacks Consensus Forecast for fiscal 2022 earnings for CMC has been revised upwards by 6.6% over the past 60 days. The company also outperformed Zacks Consensus Estimate in three of the last four quarters. It delivered an average earnings surprise of roughly 7.4% over that time frame.
2nd-ranked UK-based EVRAZ is benefiting from higher steel, vanadium and coal product sales prices and improved activity in steel-consuming sectors. Cost reduction, productivity and customer-focused initiatives also increase their margins. EVRAZ also remains focused on de-leveraging its balance sheet and appears to be on the right track with key development projects. These factors contributed to the share price's appreciation of approximately 27% this year.
EVRAZ expects 9.5% earnings growth for 2022. The consensus forecast for 2022 earnings for EVRAZ has been revised upwards by 31.9% over the past 60 days.
#3 Pennsylvania-based United States Steel is profiting from strong demand in recent markets, the Best for All business model and higher domestic steel prices. It is witnessing strong consumer driven demand. The investment in Big River Steel is also expected to increase the company's earnings and create significant synergies. Cost-saving initiatives and efforts to improve operational efficiency are also driving their results. Driven by these factors, its shares have risen by about 35% to date.
United States Steel's Zacks Forecast for 2022 earnings has been revised up 60.3 percent over the past 60 days. The company also surpassed the Zacks Consensus Estimate, averaging 24.5% in each of the last four quarters.
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