Investing in Steel through Industry Leaders
The best way to get exposure to steel is by investing in companies that produce steel, specifically globally integrated steel companies. Not all of the leading companies are available for investment, however.
Some of the top steel-producing operations are private, and others trade on foreign exchanges that don’t issue American Depository Receipts (ADRs). (ADRs essentially allow you to invest in foreign companies through U.S. financial institutions.)
The following list represents good investments that not only are the best-run companies, but also display the greatest potential for future market dominance:
U.S. Steel (NYSE: X): U.S. Steel, which was formed as a result of the consolidation of Andrew Carnegie’s steel holdings in the early 20th century, is one of the oldest and largest steel companies in the world. U.S. Steel represents by itself the whole history of the modern steel industry. At one point it was the largest producer of steel in the world.
While it has scaled down its operations, U.S. Steel is still a significant player in the industry today, and is the seventh largest steel producing company worldwide. U.S. Steel is involved in all aspects of the steel-making process from iron ore mining and processing to the marketing of finished products.
Nucor Corp. (NYSE: NUE): The American steel industry remains a robust competitor on the global stage, despite the dominance of Asian (particularly Chinese) companies. Nucor operates almost exclusively in the United States and, if you’re interested in getting exposure to the American steel market, you should consider an investment in it. Nucor is also one of the few companies to operate mini-mills domestically, which many argue are more cost-efficient than the traditional blast furnaces.
ArcelorMittal (NYSE: MT): The two largest steel companies in the world entered into a merger agreement in 2006. Now, the market leader is taking aggressive steps in response to global downturns in demands. ArcelorMittal expects to weather the dismal operating climate by reducing its production, debt, inventory, and workforce — key moves in a challenging economy.