Steel Dynamics (STLD) stock is down 13.6% this year based on February 12 closing prices amid the coronavirus scare. The company had a decent 2019 even as some of its peers posted losses. Steel Dynamics posted record steel shipments last year. Its net income was the third-best, while cash flow from operations was the second-best in its relatively short history. But the big picture is, Steel Dynamics managed to increase shipments in a challenging market. The company is also investing in several new projects, including the 3 million per ton annum capacity flat roll mill. It is also enhancing its capacity to produce value add products that should aid its margins in the coming years. The company expects $425 million of incremental annual EBITDA benefits from its growth projects. Last year, it generated an adjusted EBITDA of $1.3 billion. The stock has been hammered amid the coronavirus scare. However, the fears might be overblown, especially in steel.

Interestingly, while aluminum and copper prices have fallen amid the coronavirus scare, US steel prices have been largely stable. Steel prices are typically decided by deals between end-users and buyers, unlike base metals like copper and aluminum, where pricing is based on trading mechanism. US steel demand has been reasonably stable, and the supply side has also been supportive. US steel imports have been falling, and some domestic production was curtailed last year amid the plunge in prices. After last year’s inventory destocking, we should see pent up demand this year. Also, given the tariffs, US steel imports would remain in check. China’s steel exports have anyways fallen over the last two years as many countries have clamped down on cheap Chinese steel in a bid to protect their domestic steel industry. Simply put, the US steel industry’s demand-supply equation looks healthy.

From a valuation perspective, Steel Dynamics is trading at a discount to Nucor (NUE). Its forward EV-EBITDA is 6.3x as compared to Nucor’s 7.2x. Notably, last year Steel Dynamics received an investment-grade credit rating, becoming the second US-based steel company to achieve the feat after Nucor. The valuation gap between the two companies looks stretched since both are similar assets.