The steel industry is fighting a long, hard battle in the aftermath of the worst recession since the Great Depression. As the financial crisis set in, demand for everything that counts steel as an input collapsed, and took the major steelmakers to the brink of insolvency.
Fast forward to today, and the recent results from the world’s major steel companies underscores the remaining challenges facing the global economy. Demand continues to be sluggish, and the frustratingly slow economic recovery means steelmakers are still struggling. That being said, are there any long-term opportunities to be had from steel?
One of the world’s comeback industries
International steel powerhouse ArcelorMittal (ADR) (NYSE:MT) is an interesting choice. As it was for the global economy, 2012 proved to be an extremely difficult year for ArcelorMittal (ADR) (NYSE:MT). The company reported a $3.7 billion net loss, driven primarily by a 2.3% drop in steel shipments.
That being said, management is more optimistic about this year than last. The company expects reported earnings before interest, taxes, depreciation, and amortization (EBITDA) to be higher in 2013 as compared to 2012. In addition, steel shipments are expected to increase by 2% to 3%, and margins are expected to improve, as well.
Moreover, ArcelorMittal (ADR) (NYSE:MT)’s struggles are well reflected in the stock price. The company trades at mult-year lows. Its shares currently sit around $11 per share, and the stock trades for just 40% of book value.
A domestic steel producer with more resilient underlying results is Nucor Corporation (NYSE:NUE), which many investors likely know for its dividend track record. To the company’s credit, Nucor Corporation (NYSE:NUE) navigated the financial crisis much better than its rivals. Late last year, Nucor Corporation (NYSE:NUE) increased its dividend for the 40th year in a row. Nucor Corporation (NYSE:NUE) has raised its dividend every year since it first began paying dividends in 1973.
Unfortunately, Nucor Corporation (NYSE:NUE) is struggling right alongside its peers. The company’s first-quarter results were unimpressive, with sales dropping 10% year over year.
Fellow U.S. steel maker United States Steel Corporation (NYSE:X) has struggled mightily since the financial crisis, seeing its shares plunge from $184 per share in 2008 to its current level of $18 per share.
The company’s sales and profits collapsed during the financial crisis and are still struggling to recover. Sales held up modestly well in a difficult 2012, dropping 2.7% year over year, but the company’s net loss more than doubled to $0.86 per diluted share.