The steel industry is part of the basic materials sector and consists of companies involved in steel production, mining, and related activities. Although steel historically has been a major U.S. industry, the number of steel mills that produce the metal has declined sharply in the past several decades due to foreign competition. Some of the big names in the global steel industry include U.K.-based Rio Tinto PLC, Brazil-based Vale SA, and Reliance Steel & Aluminum Co.

Steel demand increased by 2.7% in 2021. The World Steel Association forecasts that steel demand will continue to increase this year, but at a much slower pace, rising 0.4%. The ongoing Russian invasion of Ukraine has significantly disrupted the global steel industry. Both Russia and Ukraine have traditionally been among the largest steel exporters in the world.

Steel stocks, as represented by the VanEck Vectors Steel ETF (SLX), outperformed the broader market in the past year. SLX's total return was -7.3%, compared to the Russell 1000 Index's total return of -17.0%. These figures and all statistics in the tables below are as of Sept. 29, 2022.

Here are the top three steel stocks with the best value, the fastest growth, and the most momentum.

These are the steel stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

These are the top steel stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

These are the steel stocks that had the highest total return over the last 12 months.

U.S. steel imports from many countries have been subject to a 25% tariff since March 2018, when former President Donald Trump imposed the duty in the name of national security under Section 232 of the Trade Expansion Act of 1962. The White House introduced the tariffs to protect the U.S. steel industry, which at the time faced challenges from an oversupply of cheaper imported steel. Proponents of the tariffs argue that they increased domestic steel mill utilization from around 70% in 2018 to 85% in 2022, while critics say the levies have hurt U.S. manufacturers in the construction, automotive, and infrastructure industries through rising steel prices caused by supply shortages.

From a performance standpoint, steel tariffs have boosted the profits of U.S. steel producers, with leading industry names U.S. Steel, Nucor Corporation (NUE), and Steel Dynamics all reporting record profits in the years since their imposition. The VanEck Steel ETF has returned 23% over the past four years, generating similar gains to the Dow Jones Industrial Average (DJIA) during the same period. More recently, the steel group has benefited from a sharp rebound in industrial activity amid the pandemic economic recovery.

Increased Infrastructure Spending: Steel stocks stand to benefit from increased federal infrastructure spending. In November 2021, lawmakers passed a $1.2 trillion infrastructure package, allocating a significant investment to upgrade the nation's roads, bridges, and railways over the next five years. Moreover, President Joe Biden has mandated that infrastructure upgrades and projects use American steel—a boon for U.S. steel-producing companies.

Attractive Valuations: As of September 2022, steel stocks trade at attractive valuations vs. their historical averages. For instance, Pittsburg-based U.S. Steel trades at 5.71 times forward earnings, below its five-year average of seven times earnings. Likewise, Nucor and Steel Dynamics trade at respective 18% and 29% discounts to their longer-term forward earnings multiples. Additionally, U.S Steel and Steel Dynamics have grown their cash pile considerably over the past year, positioning both producers for operational expansion should they choose.

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

World Steel Association. "Worldsteel Short Range Outlook April 2022."

Financial Times. "Europe Battles to Secure Steel Following Russia's Invasion of Ukraine."

ArcelorMittal SA. "ArcelorMittal announces the commencement of a new share buyback program of 60,431,380 shares for 2022-2023."

Commercial Metals Co. "Commercial Metals Company Acquires Advanced Steel Recovery."

Steel Dynamics Inc. "Steel Dynamics Reports Record Second Quarter 2022 Results."

Nucor Corp. "Nucor Announces 198th Consecutive Cash Dividend."

White House. "A Proclamation on Adjusting Imports of Steel Into the United States."

S&PGlobal. "U.S. Metals End-Users Ask Biden to Drop Steel Tariffs Amid Record Prices."

Bloomberg. "The U.S. Steel Sector Would Be Booming Even Without Trump's Tariffs."

Barron's. "Steel Gets a Boost From Joe Biden. One Stock for Investors to Consider."

Morningstar. "United States Steel Corp."

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