The last four months have shown that I was too hasty in shifting my outlook on Steel Dynamics (STLD) from "buy" to "hold", as steel prices have rocketed higher on industrial restocking (especially auto companies) and steel companies have been surprisingly slow to restart shuttered mills, with capacity utilization still at only 75% despite spot prices of close to $1,200 per ton. With some buyers still reluctant to place orders ahead of expected capacity additions (which should lower prices), and Steel Dynamics benefitting from a lag in realizations, the first half of 2021 should look quite good.
Then again, I do still believe that prices will weaken in the second half as restocking fades and more capacity comes online. Likewise, I'm still not as bullish on the outlook for non-resi construction in 2021 or 2022.
While I was premature downgrading Steel Dynamics in October, I would note that the share price appreciation of roughly 25% since then has been outshone by Acerinox (OTCPK:ANIOY) (up about 35%), Alcoa (AA) (up 57%), and Ternium (TX) (up 35%) - all of which I recommended in lieu of Steel Dynamics. As things sit today, I like Steel Dynamics more, and I do think infrastructure stimulus could provide a kicker. I don't know that I can say Steel Dynamics is my favorite name now, but I do see some upside here.
Read more here:
Steel Dynamics Ideally Positioned To Leverage Soaring Steel Prices
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