What are the best steel stocks to watch?
Steel has made the fortunes of more than a few people throughout history. Here, we’ll run you through five of the top steel stocks to watch in terms of trading volume, and we’ll show you how to take a position.
Steel industry overview
The steel industry has been the foundation of industrialisation for more than 100 years. As a result, it has helped to make the fortunes of some of the richest people in history, including Andrew Carnegie, John D. Rockefeller and John Pierpont Morgan Sr.
In the present day, it’s still the backbone of industry and development. That said, the global slowdown brought about by coronavirus has negatively impacted the steel industry. This is especially true as government lockdowns around the world meant that building projects ground to a halt for several months in 2020 – which reduced the demand for steel.
There are many different uses for steel in the present day, including:
- Long steel: used in wires, rails, rods, girders and bars
- Flat steel: used in steel sheets, slabs, cold-rolled steel and plates
- Stainless steel: used mainly in the construction industry for stadiums, houses, skyscrapers, offices and other buildings
Different companies have different parts to play in the steel production process. For example, mining companies produce iron ore and other base metals that are used to produce steel. In turn, refineries and steel mills take the ore, as well as scrap steel, and turn it into a useable base product.
Steel companies also could be those that take the base product – steel bars for example – and turn it into usable sheets, wires, girders, plates, slabs or beams that are used in construction and infrastructure.
Top steel stocks to watch
In this article, we’ll look at the five top steel stocks in terms of trading volume in the three months from 15 April 2020 to 15 July 2020, along with the company share prices from January 2020 to July 2020. The companies include mining companies, companies that produce the base products from ore or scrap, or companies that turn this base product into usable steel.
United States Steel Corporation
United States Steel (US Steel) was founded in 1901. Today, it’s one of the original behemoths of the steel industry in the US and around the world. It has operations in the US, as well as across central Europe.
The products that US Steel manufactures range from steel sheet to products for the automotive, appliance, container, industrial machinery, construction, and oil and gas industries.
The company is listed on the New York Stock Exchange (NYSE) under the X ticker. It’s also a component of the S&P 400 index. In the three month period from 15 April 2020 to 15 July 2020, US Steel had an average trading volume of 15,443,000 shares per day.
Cleveland-Cliffs Inc. is not a steel manufacturer, but it does produce iron ore pellets which are integral to the steel-making process. The company owns and operates several iron ore mines, most notably around the Great Lakes region of the US.
It also makes and manufactures hot-briquetted iron (HBI), which is a compacted and more malleable form of direct reduced iron (DRI), designed to be easier to transport, handle and store.
The company is listed on the NYSE under the CLF ticker. It’s also a component of the Russell 2000 index. In the three month period from 15 April 2020 to 15 July 2020, Cleveland-Cliffs Inc. has an average trading volume of 12,743,000 shares per day.
Gerdau is one of the largest producers of long steel in the world, as well as the largest in Latin America. ‘Long steel’ includes steel wire, rods, rails, girders and bars. The company operates a whole host of steel processing facilities, as well as steel mills and iron ore extraction sites.
Its core business is centred on transforming scrap steel into usable material, plus refining iron ore into steel products.
Gerdau has a primary listing on the Brasil Bolsa Balcão (B3) index in Brazil under the GGB ticker, as well as secondary listings on the NYSE and Bolsa de Madrid (BMAD). For the three months from 15 April 2020 to 15 July 2020, an average of 9,859,000 Gerdau shares were traded per day.
ArcelorMittal is the world’s largest steel producer, and it was formed in 2006 through a merger between Arcelor and Mittal Steel. The company is involved in research and development in the steel industry, as well as steel manufacturing and the mining process.
Significant breakthroughs include the production of Usibor 2000, a type of steel which is said to be one third stronger than other forms of steel – and is especially well-suited to automotive manufacturing.
ArcelorMittal is listed on four stock exchanges. These include Euronext, the NYSE, and the Luxembourg Stock Exchange (LuxSE) under the ticker MT, as well as the BMAD under the ticker MTS. From 15 April 2020 to 15 July 2020, 6,678,000 ArcelorMittal shares were traded on average per day.
Nucor Corporation is the largest steel producer in the United States. It has a considerable scrap metal operation, as the company seeks to recycle scrap steel as opposed to using furnaces and refineries to melt and shape iron.
The company produces steel bars, girders, joists, decking, as well as sheet steel and a range of other steel products, with many of these products being produced from millions of tonnes of scrap steel a year.
Nucor is listed on the NYSE under the NUE ticker, and it’s a component of the S&P 500 (US 500). In the period from 15 April 2020 to 15 July 2020, over 2,306,000 Nucor shares were traded on average per day.
How to trade and invest in steel stocks
To get exposure to steel stocks, you can choose to either trade or invest. Let’s go through each of these in turn.
Trading steel stocks means that you’ll be speculating on the stock’s price movements with financial derivatives like spread bets and CFDs. These enable you to take a position without having to own the underlying shares, meaning you can go long to speculate on prices rising, as well as short to speculate on prices falling.
Plus, you’ll be able to open a position with leverage – granting you full market exposure while only having to commit a proportion of the full position size upfront. But, while leverage can increase your profits, it can also increase your losses so it’s important to take steps to manage your risk while trading.
Investing in steel stocks means that you’ll be taking direct ownership of them, rather than simply speculating on their value. This’ll make you a shareholder, and depending on the company you could be eligible to receive voting rights and dividends.
Investing means that you’ll have to pay the full value of the shares upfront, which also caps your maximum loss at the amount that you initially paid to purchase the shares.
Steel stocks summed up
- Steel stocks have been hit by the coronavirus as the industry has slowed down amid government shutdowns
- But, trading volume is picking up now that lockdowns are being lifted
- The five companies listed here had the highest average daily trading volumes from 15 April 2020 to 15 July 2020
- There are two ways to take a position on steel: trading or investing
- Trading lets you speculate on the price of steel stocks rising or falling, and investing in steel stocks gives you direct ownership of the shares
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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