According to the World Steel Association, global crude steel production fell 10.6% year-over-year in October to 145.7 million tonnes. An abrupt decline in demand has led to stagnant price trends in the steel industry. Furthermore, the shares of United States Steel Corporation (X) declined on Friday after the company issued fourth-quarter EBITDA guidance that failed to meet Wall Street’s expectations.

In addition, the debt crisis involving a major Chinese property developer has hit the performance of the world’s second-largest economy’s steel sector, which is expected to affect the global scene given China’s dominance. With X having already issued a warning about a downturn for the steel industry, the segment remains volatile.

Therefore, we think it could be wise to avoid fundamentally weak steel stocks Nucor Corporation (NUE), POSCO (PKX), and Tenaris S.A. (TS) now.

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Nucor Corporation (NUE)

NUE manufactures and sells steel and steel products. The Charlotte, N.C.-based concern operates through three segments: Steel Mills; Steel Products; and Raw Materials. The company offers its products through in-house sales forces, internal distribution, and trading companies. 

On December 13, 2021, NUE announced its agreement to acquire a majority ownership position in California Steel Industries, Inc. However, this move might not yield immediate profits, given that the shares of NUE recently underperformed compared to its competitors.

NUE’s net sales came in at $10.31 billion, up 109.3% year-over-year, for its fiscal third quarter, ended October 2, 2021. However, its cash and cash equivalents came in at $1.76 billion for the period ended October 2, 2021, compared to $2.64 billion for the period ended December 31, 2020. Its other current assets were $346.28 million, compared to $573.05 million for the same period. Furthermore, its total liabilities were  $11 billion, compared to $8.89 billion, also for the same period.

Analysts expect NUE’s revenue to decrease 5.1% year-over-year to $34.7 billion in its fiscal year 2022. Its EPS is expected to decline 28% year-over-year to $16.75 in the next year. The stock has declined  8.4% in price since hitting its 52-week high of $128.81 on August 13, 2021, to close Friday’s trading session at $118.

POSCO (PKX)

Headquartered in Pohang, South Korea, PKX and its subsidiaries manufacture and sell steel rolled products and plates in South Korea and internationally. It operates through four segments: Steel; Construction; Trading; and Others. 

For the third quarter, ended September 30, 2021, PKX’s revenue increased 72% year-over-year to ₩11.31 trillion ($9.49 billion). However, its net intangible assets came in at ₩549.7 billion ($461.27 million) for the period ended September 30, 2021, compared to ₩621.93 billion ($521.88 million) for the period ended December 31, 2020. Its other non-current assets were ₩79.18 billion ($66.44 million), compared to ₩107.58 billion ($90.27 million), for the same period.

Over the past nine months, the stock has declined  8.4% in price to close Friday’s trading session at $61.13.

Tenaris S.A. (TS)

Based in Luxembourg, TS, through its subsidiaries, produces and sells seamless and welded steel tubular products; and provides related services for the oil and gas industry and other industrial applications. 

TS’ net sales increased 73.2% year-over-year to $1.75 billion for its fiscal third quarter, ended September 30, 2021. However, its net intangible assets came in at $1.38 billion for the period ended September 30, 2021, compared to $1.43 billion for the period ended December 31, 2020. Also, its total equity and liabilities came in at $14.54 billion, compared to $13.72 billion for the same period.

TS’ EPS is expected to decrease at 5.4% per annum for the next five years. Over the past month, the stock has declined  9.7% in price to close Friday’s trading session at $20.24.

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NUE shares were trading at $111.34 per share on Monday afternoon, down $6.66 (-5.64%). Year-to-date, NUE has gained 112.14%, versus a 22.22% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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