Chicago, IL – September 29, 2015 – Today, Zacks Equity Research discusses the Steel (Part 2), including United States Steel Corp. (X), ArcelorMittal (MT), Nucor Corporation (NUE) and Steel Dynamics Inc. ( STLD). Industry: Steel (Part 2) Link: https://www.zacks.com/commentary/57605/how-steel-stocks-can-strengthen-your-portfolio In the past few years, demand for steel has been on the rise owing to the rapid growth witnessed in developing economies that helped to counter the slowdown in developed nations. Asia, particularly China, remained the principal growth driver. However, the current scenario is slightly alarming with the conventional growth engine, China, adding an element of uncertainty to the outlook. Nevertheless, there are plenty of reasons to be optimistic about the broader steel industry, both in the short and the long term. Below, we discuss some of the key reasons and what investors in the steel sector can look forward to in the coming months and years.
Rebound in Construction
The housing and construction sector is the largest consumer of steel today, accounting for almost half of the steel consumption. The home construction market recovered at a steady pace in 2014, largely on the back of overall economic growth, improving job numbers, growing consumer confidence, moderating home prices, stabilizing mortgage rates and a low level of housing inventory. This momentum is likely to continue in 2015.
The US Architecture Billings Index (ABI), an economic indicator that provides an approximately nine-to-twelve-month glimpse into the future of non-residential construction spending activity, remained over 50 for most of the recent months. Any score above 50 indicates an increase in billings.
Renewal of long-stalled construction projects and much awaited access to credit from lending institutions along with an improving overall economy have helped revitalize the commercial real estate sector in recent months. Moreover, requirement for emerging projects, such as education facilities and government buildings, is creating demand in the sector. The American Institute of Architects’ (AIA) anticipates spending in the non-residential building sector will rise 7.7% and commercial/industrial will rise 11.8% in 2015.
In the long term, as urban population increases worldwide, so will the need for steel to build skyscrapers and public-transport infrastructure. Emerging economies will continue to be major demand drivers due to the huge amount of steel required for urbanization and industrialization. Hence, the demand for steel is expected to remain strong in the years to come.
Companies like United States Steel Corp. (X), ArcelorMittal (MT), Nucor Corporation (NUE) and Steel Dynamics Inc. ( STLD) will benefit from the momentum in construction. Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today. Find out What is happening in the stock market today on zacks.com. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report UTD STATES STL (X): Free Stock Analysis Report ARCELOR MITTAL (MT): Free Stock Analysis Report NUCOR CORP (NUE): Free Stock Analysis Report STEEL DYNAMICS (STLD): Free Stock Analysis Report To read this article on Zacks.com click here.
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