2 Scorching-Hot Steel Stocks Rated Strong Buy

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A gradual economic recovery is boosting demand for steel in response to strong demand from major end-markets such as automotive and construction. Against this backdrop, we think it could be wise to bet on fundamentally sound steel stocks POSCO (PKX) and Companhia (SID).

The rapid recovery of the steel industry following the pandemic-led slowdown has been driven primarily by high demand from China. The recovery has encouraged investors to buy steel stocks, as evidenced by VanEck Vectors Steel ETF’s (SLX) 15.5% gains over the past month versus SPDR S&P 500 ETF Trust’s (SPY) 0.6% loss.

The demand for steel is expected to increase in the coming months, with the economy’s reopening driving increased steel demand from major end-markets, such as automotive and construction. And President Biden’s proposed $2 trillion-plus infrastructure plan is expected to further boost the demand for steel. According to Market Research Future, the steel market is expected to hit a $963.6 billion valuation by 2027.

Given this backdrop, we think it wise to scoop up the shares of POSCO and Companhia Siderúrgica Nacional, which are well positioned to benefit significantly.

POSCO 

Headquartered in Pohang, South Korea, PKX manufactures and sells steel rolled products and plates internationally. It operates through four segments: Steel, Construction, Trading, and Others. The company offers hot and cold rolled steel, stainless steel, plates, wire rods, and silicon steel sheets, among others.

The company announced on March 31 that it will supply 26,000 tons of steel plates to the construction of commercial facilities built by Shinsegae Eng. & Construction Co., Ltd. PKX’s revenue climbed 11.9% year-over-year to 16.07 billion KRW ($14.21 million) for its fiscal first quarter, ended March 31. Its operating earnings grew 13.9% year-over-year to 1.55 billion KRW ($1.37 million). The company’s net earnings increased 161.8% year-over-year to 1.14 billion KRW ($1 million).

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