Vale Vs. Cleveland-Cliffs: Which Steel Stock Is A Better Buy?

Vale S.A. (VALE - Get Rating) and Cleveland-Cliffs Inc. (CLF - Get Rating) are two leading producers of raw materials in the steel industry. U.S.-based VALE’s ferrous minerals segment produces and extracts iron ore, coal and other ferrous products, which are used in the production of steel. Brazil-based CLF’s Steel and Manufacturing segment includes subsidiaries that offer carbon and stainless-steel tubing products, tool design and build, and complex assemblies.

While the industry suffered falling steel prices in early 2020 due to the COVID-19 cessation of industrial activities, steel prices have rebounded. This was due mainly to an increase in demand for steel in industrial and manufacturing activities after the economy reopened. The VanEck Vectors Steel ETF’s (SLX) has returned 163.1% over the past year, compared to S&P 500’s 49.5% gains over this period.

VALE – The increasing electrification of vehicles and the Biden administration plans to reshape America’s infrastructure will likely drive the demand for steel over the next few years. We think two leading steel manufacturing companies, Vale (VALE) and Cleveland Cliffs (CLF), are well-positioned to capitalize on the industry tailwinds and deliver solid returns. But let’s find out which of these two stocks is a better buy now.

President Biden’s proposed spending to encourage the electrification of vehicles and reshaping America’s infrastructure is likely to benefit the steel industry over the next few years. Indeed, the global IF Steel market size is expected to grow at a CAGR of 5.3% over the next four years and reach $61.48 billion by 2025.

VALE has returned 16.5% so far this year versus CLF’s 23.6% gains. In terms of the past year’s performance, CLF is a clear winner with 409.6% returns versus VALE’s 140.2%. But which of these two stocks is a better pick now? Let’s find out.

Latest Movements

On April 13, VALE priced an offering of VALE’s 214.33 million debentures at  R$53.50, totaling R$11.47 billion.

VALE plans to conduct a share buyback of 2.70 million common shares and their respective ADRs over the next 12 months. The program demonstrates its management’s confidence in Vale’s potential to consistently create share value.

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