Commodities & Metals

4 Steel Stocks to Buy as Demand and Tariffs Are Huge

Steel Dynamics

This is another stock that the Jefferies team remains very positive on. Steel Dynamics Inc. (NASDAQ: STLD) operates six steel mini-mills in Indiana, Virginia, Mississippi and West Virginia. Production capacity has been nearly 10 million tons, of a total 110 million U.S. capacity.

The company makes flat-rolled products, special/merchant bars and structural steel products. Steel Dynamics can process about 7 million tons of ferrous scrap and has a downstream operation that processes finished steel. The Jefferies report noted this:

The company remains one of the analyst top picks in the US steel sector as a high-quality play on the gradually tightening domestic steel market and supported by bullish global trends led by Chinese supply-side reform. In the near-term, Steel Dynamics should benefit from greatly improving margins as steel prices continue to move sharply higher following several rounds of price hikes launched in October.

Shareholders of Steel Dynamics are paid a 1.33% dividend. The $54 Jefferies price target is higher than the consensus target of $52.46. The stock closed at $46 on Thursday.

U.S. Steel

This venerable steel producer remains a favorite across Wall Street. United States Steel Corp. (NYSE: X) produces and sells flat-rolled and tubular steel products in North America and Europe. It operates through three segments. Its Flat-Rolled Products segment offers slabs, rounds, strip mill plates, sheets and tin mill products. This segment serves customers in the automotive, consumer and the combined industrial, service center and mining commercial markets.

The Tubular Products segment offers seamless and electric resistance welded steel casing and tubing, as well as standard and line pipe and mechanical tubing products primarily to customers in the oil, gas and petrochemical markets. The company also provides railroad services and owns, develops and manages various real estate assets.

And its U.S. Steel Europe segment provides slabs, sheets, strip mill plates, tin mill products and spiral welded pipes, as well as heating radiators and refractory ceramic materials. This segment serves customers in the construction, service center, conversion, container, transportation, appliance and electrical, oil, gas and petrochemical markets.

Shareholders are paid just a 0.54% dividend. Jefferies has set its price target at $45. The consensus target is $45.46 per share, and the stock closed most recently at $44.35.

The weak dollar was very helpful to the steel industry for much of 2017, and it is expected to continue providing a lift this year. While the dollar won’t stay weak forever, you can bet that the administration would like to see it stay weak for the time being. With pricing firm, and export potential and demand at home still strong, all these stocks make sense for growth investors.