For Immediate Release
Chicago, IL - Dec 19, 2017 - Today, Zacks Equity Research discusses the Industry: Steel, Part 2, including Nucor Corp.NUE , Commercial Metals Co.CMC , United States Steel Corp.X , ArcelorMittalMT and Steel Dynamics Inc.STLD .
Industry: Steel, Part 2
Steel is utilized in every important industry ranging from energy, construction, automotive and transportation, infrastructure, packaging and machinery. Expectations of increased infrastructure-related spending in the United States have fueled steel company stocks to new highs, particularly following the November 2016 election.
There are plenty of reasons to be optimistic about the broader steel industry, both in the short and long term. Here, we discuss some of the key reasons and what investors in the steel sector can look forward to in the coming months and years.
The "Trump" Card
After being in the dumps for a major part of 2016, steel stocks got a big boost following Trump's win in November on expectations of significant infrastructure spending in a Trump administration. The president's call for the massive infrastructure spending is likely to have a beneficial effect on the steel industry given the expected increase in steel demand as it is a key component in many infrastructure products. Trump's "big" spending plans have thus painted a bullish picture for steel companies.
Construction Sector Remains a Pillar of Strength
The homebuilding market remains a pillar of strength for the economy along with the steel industry. The housing and construction sector is the largest consumer of steel, accounting for almost half of the total consumption. Positives like an improving economy, healthy job growth, low interest rates, positive consumer confidence and a tight supply situation raise optimism about the sector's performance.
The American Institute of Architects ("AIA") anticipates spending in the non-residential building sector to advance around 6% in 2017. Nucor Corp. and Commercial Metals Co. are the leading steel suppliers to the non-residential construction sector.
Over the long haul, as the urban population increases worldwide, the need for steel to build skyscrapers and public transport infrastructure should see an uptrend as well. Emerging economies will continue to be major catalysts owing to the huge amount of steel required for urbanization and industrialization. Hence, demand for steel is anticipated to remain strong in the years to come. Companies like United States Steel Corp., ArcelorMittal, Nucor Corp. and Steel Dynamics Inc. would gain from momentum in construction.
Steel to Ride on Demand from Automotive Sector
The automotive sector, which is the second largest steel consumer, is showing significant promise despite threats from other materials. The rising sales trend is anticipated to persist driven by falling fuel prices, low interest rates, enhanced job security, rising wages and household wealth. Moreover, the trend will be backed by improving consumer confidence, residual pent-up demand, attractive deals and vehicle launches.
Moreover, the high average age of light vehicles on U.S. roads is resulting in large replacement demand for cars as well as car parts. This will benefit auto parts manufacturers and retailers. The auto industry in Asian countries, particularly China and India, are also projected to flourish over the next five to seven years. China is the biggest and fastest growing auto market in the world in terms of number of vehicles sold.
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