Investing in steel stocks may be a wise choice for investors who are bullish on the U.S. economy and global infrastructure investments.
However, it’s important to keep in mind that the steel industry is a highly cyclical business.
The production of steel is a very carbon intensive process. The iron and steel industry account for 2.6 gigatonnes of carbon emissions annually (IEA, 2019).
This equates to more than 7% of the world’s total energy emissions.
With the Inflation Reduction Act signed into law in August 2022, this could provide billions of dollars in incentives to steel producers adamant about reducing their annual co2 emissions.
Despite the steel industry producing enormous carbon emissions, the metal is highly recyclable.
Steel is used in the production of cars, ships, trains, construction products, and household appliances.
As a critical metal for the backbone of the world economy, steel stocks provide a great investment case.
Below, we will present the 7 Best Steel Stocks to consider in 2023!
- Nucor
- Steel Dynamics
- Reliance Steel & Aluminum
- United States Steel Corp
- ArcelorMittal
- Cleveland-Cliffs
- Worthington Industries
1. Nucor (NYSE: NUE)
- Ticker: NUE
- Dividend Yield: 1.38%
- 10-Yr Dividend Growth Rate: 2.25%
- Payout Frequency: Quarterly
- Payout Ratio: 6.98%
- Market Cap: $36.83 Billion
Nucor is an American steel manufacturer headquartered in Charlotte, North Carolina, United States.
They are the largest steel producer in the United States.
The company is also the biggest recycler of scrap steel in North America. Its operations include 23 scrap metal production facilities.
Nucor’s DRI plant in Louisiana alone has the ability to produce up to 2.5 million tonnes of steel per annum.
Nucor has developed a robust sustainability and ESG strategy, likely to be the leading beneficiary of the Inflation Reduction Act.
The company has committed to a massive 35% reduction in indirect (Scope 1) and GHG intensity from their steel mills (Scope 2) by 2030. Furthermore, they began production of the world’s first carbon negative steel (ECONIQ).
In 2022, the company had annual revenues of $41.51 Billion.
Nucor’s commitment to sustainable steel production and consistent free cash flow make it the best steel stock to buy in 2023.
2. Steel Dynamics (NASDAQ: STLD)
- Ticker: STLD
- Dividend Yield: 1.62%
- 10-Yr Dividend Growth Rate: 11.50%
- Payout Frequency: Quarterly
- Payout Ratio: 6.50%
- Market Cap: $17.81 Billion
Steel Dynamics is an American steel manufacturer headquartered in Fort Wayne, Indiana, United States.
They are one of the largest carbon steel producers in the United States.
The company was founded back in 1993, when three former Nucor executives came together and raised $340 Million in funding.
In 2014, Steel Dynamics doubled their EAF flat roll steel production capacity and expanded a more dominant presence in southern U.S. states.
They made a number of acquisitions over the years including the acquisition of Severstal Columbus in 2014 for $1.62 Billion, as well as, the acquisition of Vulcan Threaded Products in 2016 for $126 Million.
Construction began for their EAF roll steel facility in Finton, Texas, which will increase their annual steel production capability by 25%.
3. Reliance Steel & Aluminum (NYSE: RS)
- Ticker: RS
- Dividend Yield: 1.63%
- 10-Yr Dividend Growth Rate: 23.51%
- Payout Frequency: Quarterly
- Payout Ratio: 11.70%
- Market Cap: $14.44 Billion
Reliance Steel & Aluminum is a metals processing and distribution company headquartered in Arizona, United States.
The company processes more than 100,000 metals including aluminum, steels, copper, and titanium. Its primary customers include metal fabricators and manufacturers.
Stainless steel products offered by Reliance primarily serve the aerospace, oil & gas, energy, pump and manufacturing industries.
Their product offerings also include advanced fabrication processes including; bending, shaping, forming, flat rolling and sheet cutting.
Reliance Steel & Aluminum employs more than 14,500 people and has approximately $14.75 billion in total assets.
In 2022, the company had annual revenues of $10.33 Billion.
4. United States Steel Corporation (NYSE: X)
- Ticker: X
- Dividend Yield: 0.76%
- 10-Yr Dividend Growth Rate: 11.50%
- Payout Frequency: Quarterly
- Payout Ratio: 2.18%
- Market Cap: $5.85 Billion
United States Steel Corporation is an American steel producer headquartered in Pittsburgh, Pennsylvania, United States.
The company was founded in the late 19th century by industrialist and financier JP Morgan. The company was formed by financing the merger of Andrew Carnegie’s Carnegie Steel Company and Elbery Gary & William Moore’s National Steel Company.
A company that once dominated the production of steel across North America would begin to face steep competition.
They are currently the 24th largest steel producer in the world.
United States Steel Corporation employs more than 22,500 people and has approximately $19.45 billion in total assets.
In 2022, the company had annual revenues of $21.06 Billion.
5. ArcelorMittal (NYSE: MT)
- Ticker: MT
- Dividend Yield: 1.47%
- Market Cap: $23.36 Billion
ArcelorMittal is a multinational steel producer headquartered in Luxembourg, Luxembourg.
They are the second largest steel producer in the world.
As of 2022, ArcelorMittal produces approximately 88 million metric tonnes of steel per annum.
ArcelorMittal was formed in 2006, when Mittal Steel launched a hostile takeover bid of European steel maker Arcelor.
The company is committed to sustainable steel production and plans to reach net zero emissions by 2050. In January 2023, they announced their single largest investment of $36 Million USD, in carbon negative steel producer Boston Metals.
ArcelorMittal employs more than 155,000 people and has approximately $94.54 billion in total assets.
In 2022, the company had annual revenues of $79.84 Billion.
6. Cleveland-Cliffs (NYSE: CLF)
- Ticker: CLF
- Dividend Yield: N/A
- Market Cap: $8.94 Billion
Cleveland-Cliffs is a metals mining company headquartered in Cleveland, Ohio, United States.
They are the largest flat-rolled steel producer in North America.
The company processes iron-ore with advanced steel fabrication capabilities. This includes tooling and sampling for complex modular structures.
Cleveland-Cliffs serves the automotive, construction, transportation and food packaging industries.
Their product offerings also include electrical steel, carbon steel, stainless steels, long steels, tubular components, and plates.
Cleveland-Cliffs employs more than 27,000 people and has approximately $18.75 billion in total assets.
In 2022, the company had annual revenues of $22.98 Billion.
7. Worthington Industries (NYSE: WOR)
- Ticker: WOR
- Dividend Yield: 2.00%
- 10-Yr Dividend Growth Rate: 11.32%
- Payout Frequency: Quarterly
- Payout Ratio: 28.23%
- Market Cap: $3.04 Billion
Worthington Industries is a metals manufacturer and steel processing company headquartered in Columbus, Ohio, United States.
The company has domain expertise in flat rolled steel processing, electrical steel laminations, and tailor welded blanks.
Their product offerings also include advanced fabrication processes including; sheet cutting, galvanized steel, hot rolled steel, steel pickling, steel slitting and more.
Worthington Industries employs more than 8,400 people and has approximately $3.64 billion in total assets.
In 2022, the company had annual revenues of $5.24 Billion.
Should You Invest In Steel Stocks?
It is no surprise that steel stocks are being talked about on the street. But investors can often be hesitant due to the fact that the steel business is highly cyclical.
According to the World Economic Forum, the world is currently facing a $15 trillion global infrastructure spending gap (WEF, 2019).
With global supply chain constraint still persisting and geopolitical tensions rising, this could bode well for North American steel makers.
Furthermore, The Inflation Reduction Act’s infrastructure spending and climate change bill could provide government incentives for U.S. steel makers like Nucor. This could help accelerate the production of their proprietary carbon negative steel.
For investors who are more risk averse, now might be a great time to invest into steel stocks as global infrastructure spending ramps up over the next decade.
Disclosure: The author holds no position mentioned in this article. Freedom Stocks has a disclosure policy.
