Markets are always looking ahead. So, it was no surprise that steel stocks charged higher in 2021 and 2022 as Congress passed the Infrastructure Investment and Jobs Act (IIJA) in 2021. This committed $1.2 trillion to projects, of which many would require steel.
The realities of interest rates and uncertainty over tariffs caused steel stocks to decline in 2024 and the first quarter of 2025. However, the last quarter has seen buyers return, and with interest rates expected to fall and more clarity around tariffs, now is a good time for investors to consider investing in steel stocks from companies that will benefit from producing steel in the United States.
Nucor Offers Best-in-Class Value at a Discount
When considering investing in any sector, it never hurts to look at the sector leaders. In the steel sector, that would be Nucor Inc. (NYSE: NUE). The vertically integrated company is the largest steel producer in the United States. The company was one of the biggest winners in terms of percentage gains as forward-looking investors bought into the anticipated growth of infrastructure spending.
NUE stock has declined over 17% in the last 12 months as investors rotated away from basic materials stocks in favor of AI stocks. However, the stock is up 18% in the last month. More clarity around tariffs and hopes of lower interest rates later this year fuel hopes for renewed infrastructure spending in non-residential construction, where Nucor has a significant foothold.
NUE stock is trading at around 22x earnings, which is higher than its historical average. However, analysts are projecting earnings growth of around 43%, which should support the current or even higher multiple. Plus, investors are getting a safe dividend from this dividend king, which has increased its dividend for 52 consecutive years.
Recent Investments May Power Steel Dynamics Stock Higher
Steel Dynamics Inc. (NASDAQ: STLD) stock has been in a consolidation pattern for the last 18 months. However, STLD stock might be among the top steel companies as domestic manufacturers are being rewarded.
Steel Dynamics recently completed a new plant in Texas that is already contributing to increased production from the vertically integrated company. The company’s strength in areas such as flat-rolled steel is likely to get a boost as demand for flat and long products will be needed to refurbish bridges and highways.
Furthermore, the company has one of the strongest balance sheets in the industry, highlighted by a debt-to-equity ratio of just 0.44%. Steel Dynamics also offers a safe dividend with a payout ratio of just 26%, but one that’s increased for 13 consecutive years.
Cleveland-Cliffs Is Likely to Have Headwinds Turn Into Catalysts
Cleveland-Cliffs Inc. (NYSE: CLF) is one of the largest domestic manufacturers of steel. That’s significant at a time when companies are being rewarded for buying steel made in the United States. Cleveland-Cliffs generates an outsized portion of its revenue from the automotive sector. Diversifying its revenue streams would be a win for shareholders.
However, that’s not the only catalyst that can boost CLF stock, which is down 24% in 2025 and 23% in the last three months. That catalyst would come from lower interest rates. Cleveland-Cliffs had a high debt load stemming from major acquisitions of AK Steel and AcrelorMittal USA in 2020 and 2021.
At that time, interest rates were still at levels near 0%. But when rates shot higher, the variable-rate structure of its debt caused its interest expense to climb at the expense of earnings and margins. Any relief the company can get from interest rates will help shore up the company’s EPS, which has been negative in the last three quarters.