5 Solid Steel Stocks To Buy As Industry Eyes Recovery In 2020

The year 2019 had been a tough one for the steel industry. Lower steel prices and weaker demand across major steel end-use markets amid a global economic slowdown and trade tensions put the industry on thin ice last year.

The U.S. steel industry, in particular, had a rough ride in 2019 notwithstanding the Trump administration’s efforts to protect it through hefty tariffs on steel imports. The American steel industry was plagued by a slump in U.S. steel prices, demand slowdown and damaging impacts of the U.S.-China trade war. All these lured investors away from the steel space last year.

The sharp decline in domestic steel prices was the major headwind faced by U.S. steelmakers in 2019. The benchmark hot-rolled coil steel (HRC) prices felt gravity’s pull last year after rallying to multi-year highs on the back of steel tariffs during 2018.

U.S. steel prices marched higher during the first half of 2018, courtesy of steel tariffs. However, after the initial euphoria fizzled out, prices tracked downward in the back half of the year and declined sharply through the first three quarters of 2019, hurting the bottom lines of U.S. steel companies.

U.S. steel stocks also remain subdued for most of 2019 amid the headwinds. Nevertheless, prices gained some ground towards the end of the year on a recovery in steel prices, optimism surrounding the initial U.S.-China trade deal and the news of revival of tariffs on steel imports from Brazil and Argentina. These two South American nations were earlier exempted from steel tariffs in 2018.

Most of the American steel stocks racked up decent gains in share prices last month, suggesting an improvement in underlying steel market conditions. However, most of them still underperformed the broader market in 2019.

Is there a rebound in the cards after a gloomy 2019? Let’s take a look.

Recovery in Steel Prices to Bring Better Tidings

There have been some green shoots of recovery in steel prices over the past couple of months, raising hopes for a reversal of fortunes in 2020. After a freefall, U.S. steel prices appear to have bottomed out. Prices gained some traction during the fourth quarter of 2019. Major U.S. steel mills raised prices during this period in a bid to reverse the downswing in domestic steel prices. Some of the U.S. steelmakers have also taken steps to reduce excess capacity, partly through idling of plants.

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