Steel Prices Set for Upturn on War-Led Supply Crunch: 5 Top Picks

The steel industry hit a speed bump after a bumper 2021 as steel prices cooled off after catapulting to all-time highs last year. The pullback is partly due to the improved supply-side situation driven by a rise in production, partly due to the restart of idled capacity.

Record-high prices allowed steel makers to rack up strong profits last year. However, steel prices started to retreat from the fourth-quarter of 2021, dragged down by shorter lead times and improved supply. The price decline has accelerated since the beginning of 2022.

Nevertheless, steel prices are likely to have bottomed out and look set to reverse the downward spiral as the ongoing Russia-Ukraine conflict has hit the global supply chain. This scenario bodes well for steel stocks like Nucor Corporation NUE, Olympic Steel, Inc. ZEUS, TimkenSteel Corporation TMST, Commercial Metals Company CMC and Gerdau S.A. GGB.

Russia-Ukraine Crisis to Trigger Price Surge

Steel prices escalated to historic highs last year on solid demand, higher raw material costs, tight supply and low steel supply-chain inventories globally. U.S. steel prices witnessed an unprecedented surge in 2021 on demand-supply imbalance. The benchmark hot-rolled coil (“HRC”) prices broke above the $1,900 per short ton level in August 2021 on supply tightness and robust demand. HRC prices hit a record high of $1,960 per short ton in late September, according to S&P Global Platts.