Metal prices have recovered sharply from their pandemic-led lows, supported by government stimulus, and rebounding demand. Both iron and steel prices are at historic highs currently. Furthermore, because President Biden plans to close an infrastructure deal by the end of this month, iron and steel companies should benefit from the potential spending it includes. Given this backdrop, we think it could be wise to buy low-priced iron/steel stocks of Usiminas (OTC:USNZY), Champion Iron (CIAFF), and Mechel PAO (MTL), which are rated ‘Strong Buy’ or ‘Buy’ in our POWR Rating system. Last year, the COVID-19 pandemic negatively affected the metal market, causing acute declines in metal prices as demand swooned. The sector was also hampered by supply chain disruptions owing to the mine closures and spending cuts. However, the industry’s rebound has so far been better than expected, with iron ore prices reaching historic highs, driven primarily by government stimulus.
Steel prices are currently at historic highs, with China cutting back production and rising demand with the resumption of construction activities. American Iron and Steel Institute CEO Kevin Dempsey expects 5 million tons of additional steel demand for every $100 billion in new infrastructure investment. In addition, steel's prospects are promising, with the global steel market expected to grow at a 4.1% CAGR to 2.2 billion metric tons by 2026.
Therefore, we think steel stocks, Usinas Siderurgicas de Minas Gerais S.A. (Usiminas) (USNZY), Champion Iron Limited (CIAFF), and Mechel PAO (MTL), which are currently trading below $5, should be solid buys now, given their fundamental strength. These stocks are rated ‘Buy’ in our proprietary POWR Rating system.