Dividends and Soaring prices signal boom time for US steel makers

If you remember a few years ago, former President Trump at campaign rallies would say he loved the steel industry and the steel industry will come back to its 1900’s global domination. It never did but the steel industry did invest in new capacity, however every time there is an investment in capacity it tends to mean more robots doing the work or more technology and the same number of people. It is ironic that under President Biden, the steel industry is experiencing a comeback partly because steel prices are at a record high.

In an article by Matt Phillips of the New York Times News Service, steel companies are performing very well on the stock market with Nucor as the top performing stock on the S&P 500. Although it is not clear how long the boom will last. Companies are hiring, primarily because shifts are not being used.

Since the 1960’s more than 400,000 jobs disappeared as a combination of foreign competition and production processes requiring less people. However, the future prices for 20 tonne rolls of domestic steel – the benchmark of most steel prices went above $1,600 a tonne.

Goldman Sachs predicts by 2023, roughly 80% of the US steel production will be under the control of 5 companies, up from 50% in 2018. The latest mergers include Cleveland-Cliffs purchased a majority of ArcelorMittal’s American mills after buying AK Steel. US Steel bought Big River Steel by purchasing the shares it did not already own.

Steel imports are down 25% since 2017 as domestic producers are capturing prices as much as $600 a tonne above those prevailing on the global markets.

Linking to dividend paying stocks, all commodities go in cycles, although for some commodities the government tries to ensure prices do not go down too much, as an investor you like that because losses will be mitigated. Whatever industry you invest in, ensure your homework includes check up on commodity prices then you can buy low and sell high.

There are more questions than answers, till the next time – to raising questions.

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