Sustainability emerges as the defining trend for the future, with clean steel positioned as a key narrative.
The surge in demand for steel post-coronavirus crisis, coupled with supply chain disruptions, catapulted steel prices to historic highs in late 2021. While prices moderated, sustained demand from green energy has kept them above historical averages.
Consequently, the clean steel movement may address the long-term supply deficit. Legacy steel companies such as ArcelorMittal (NYSE:MT) recently led a $120 million investment in green steel producer Boston Metal, acknowledging the need for change. That strategic move is further supported by tech giant Microsoft’s (NASDAQ:MSFT) climate-technology fund.
Moreover, Fortune Business Insights anticipates noteworthy expansion in the global green steel market, forecasting a transition from $2.70 billion in 2023 to an impressive $98.84 billion by 2030. Hence, the timing is opportune for investors to seek exposure to clean steel stocks with substantial growth potential.
Clean Steel Stocks: ArcelorMittal (MT)
ArcelorMittal, a leading global steel producer, is looking to play a critical role in the advancement of green steel. Its massive $120 million investment in green steel startup Boston Metal speaks volumes about its forward-looking approach. Targeting a 2026 launch, this initiative promises to introduce cutting-edge equipment that drastically cuts carbon emissions from steel production. The move complements ArcelorMittal’s commitment to sustainable manufacturing, shown by its innovative hydrogen-based iron ore reduction project at the Hamburg plant a few years ago.
The company’s core business remains strong, marked by an impressive 8 out of 10 for financial strength rating from the financial research platform GuruFocus. Consequently, Wall Street reflects this success with a Buy rating for ArcelorMittal, anticipating a stellar 26% upside. That optimism is rooted in the company’s solid long-term prospects and strategic investments likely to lead to future profitability.
Nucor (NUE)
Nucor (NYSE:NUE) is strategically expanding its horizons, diversifying its steel mills and product lines to serve a wider customer base. By enhancing its product offerings, Nucor is positioning itself as a versatile player in the steel industry, ready to meet the evolving demands of its clientele.
Financially, Nucor stands out with an EBIT margin of 18% over the trailing 12 months (TTM), outpacing the sector median by 57%. Moreover, its levered free cash flow margin at 11.2% significantly exceeds the sector median of 4.8%, showcasing its superior operational efficiency and financial health. Moreover, NUE stock is up a commendable 32% surge in its stock price in 2023.
Furthermore, Nucor’s sustainability efforts shine with its “Made for Good” campaign, embracing circular recycling, emission reduction collaborations and sustainable steel development.
Cleveland-Cliffs (CLF)
Cleveland-Cliffs (NYSE:CLF) emerges as a standout player in the steel industry, navigating towards cleaner and more environmentally friendly production practices. Positioned strategically amid the global clean energy push, CLF has experienced an impressive 30% surge in value over the past six months. The firm is pushing for sustainable steel production, notably through its production of eco-friendly hot-briquetted iron (HBI) in its facility in Toledo. Moreover, CLF is also innovating with hydrogen injection to replace coke in blast furnaces, significantly reducing carbon emissions.
Furthermore, buoyed by robust pricing power, Cleveland-Cliffs recently reallocated funds from an unsuccessful U.S. Steel acquisition to initiate an assertive share buyback strategy. In the third quarter alone, 3.9 million shares were repurchased at $15.09 each, signaling confidence and foreshadowing a potential stock price surge.
Moreover, this anticipated acceleration of share buybacks and frequent price hikes on CLF’s products align with robust demand, reinforcing Cleveland-Cliffs as a compelling investment opportunity.
On the date of publication, Muslim Farooque did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
