Top Steel Stocks for Q3 2021

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The steel industry is part of the basic materials sector and consists of companies involved in steel production, mining, and related activities. Although steel historically has been a major U.S. industry, the number of steel mills that produce the metal has declined sharply in the past several decades due to foreign competition. Some of the big names in the global steel industry include U.K.-based Rio Tinto PLC (RIO), Brazil-based Vale SA (VALE), and Reliance Steel & Aluminum Co. (RS).

The industry is rebounding after a challenging 2020 due to the pandemic. Steel stocks, as represented by the VanEck Vectors Steel ETF (SLX), significantly outperformed the broader market in the past year. SLX’s total return is 111.7%, more than triple the Russell 1000’s total return of 34.8%. These figures and all statistics in the tables below are as of June 8, 2021.

Here are the top 3 steel stocks with the best value, the fastest growth, and the most momentum.

These are the steel stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Best Value Steel Stocks
  Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
Mechel PAO ( MTLPR) 0.77 0.8 1.4
Ternium SA ( TX) 36.63 7.2 5.2
Companhia Siderurgica Nacional ( SID) 8.72 12.0 6.3

Source: YCharts

  • Mechel PAO: Mechel PAO is a Russia-based mining, steel, and power company. The company produces semi-finished steel, coke, iron ore, chemical products, and electricity. For Q1 2021, the company reported sharp year-over-year (YOY) declines in production and sales of many of its key products due to external and internal factors. The company said that market trends improved significantly in April.
  • Ternium SA: Ternium is a Luxembourg-based company that manufactures and processes steel products used in a broad range of industries including automotive, home appliances, energy, capital goods, and construction.
  • Companhia Siderurgica Nacional: Companhia Siderurgica Nacional is a Brazil-based steel manufacturer. It mines iron ore and produces semi-finished steel products for multiple industries. For Q1 2021, the company reported net income of $5.7 billion reals (about $1.1 billion) compared with a net loss for Q1 2020. Net sales revenue more than doubled YOY. Strong sales volumes and improving pricing contributed to the performance.

These are the top steel stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

Fastest Growing Steel Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Cleveland-Cliffs Inc. ( CLF) 20.27 10.1 N/A (see company description) 1,030
Schnitzer Steel Industries Inc. ( SCHN) 57.20 1.6 1,000 36.6
Gerdau SA ( GGB) 6.23 10.6 800.9 43.4

Source: YCharts

  • Cleveland-Cliffs Inc.: Cleveland-Cliffs is a major North American flat-rolled steel producer and major supplier of iron ore pellets. The company is not included in the EPS growth column above because it went from negative EPS in Q1 2020 to positive EPS in Q1 2021, meaning that a YOY growth figure is not applicable.
  • Schnitzer Steel Industries Inc.: Schnitzer Steel Industries is a steel scrap recycling business operating in the western that supplies scrap to international and domestic steel producers. It also operates collection and processing facilities.
  • Gerdau SA: Gerdau is a Brazil-based steel manufacturer with facilities in 10 countries. Using recycled metal scrap to make steel, its products are used in industries including agriculture, energy, automotive, and manufacturing. In late April, the company announced plans to resume operations at its Araucária, Paraná unit in the second half of 2021 due to the positive outlook for steel demand in Brazil in 2021. The unit has been out of operation since 2014 and has an annual crude steel production capacity of 420,000 tons.

These are the steel stocks that had the highest total return over the last 12 months.

Steel Stocks with the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Stelco Holdings Inc. ( STLC.TO) CA$34.34 CA$3.0 330.1
Companhia Siderurgica Nacional (SID) 8.72 12.0 253.4
Schnitzer Steel Industries Inc. (SCHN) 57.20 1.6 230.4
Russell 1000 N/A N/A 34.8
VanEck Vectors Steel ETF (SLX) N/A N/A 111.7

Source: YCharts

  • Stelco Holdings Inc.: Stelco Holdings is a Canada-based company that produces hot rolled, cold rolled, and coated sheet steel products. These products are used in the construction, automotive, and energy industries. For Q1 2021, Stelco reported net income of CA$119 million (about $98.4 million), compared to a net loss one year prior. Revenue improved by 49.4% YOY. The company attributed the results to rising steel demand and key strategic investments in its operating facilities.
  • Companhia Siderurgica Nacional: See above for company description.
  • Schnitzer Steel Industries Inc.: See above for company description.

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Source: Investopedia