Higher U.S. steel prices have created a favorable landscape for American steel producers. Tightened supply and higher end-market demand are driving steel prices. Players from the industry, such as Nucor Corporation NUE, Ternium S.A. TX, Gerdau S.A. GGB and L.B. Foster Company FSTR are set to benefit from these trends.
About the Industry
The Zacks Steel Producers industry serves a vast spectrum of end-use industries, such as automotive, construction, appliance, container, packaging, industrial machinery, mining equipment, transportation, and oil and gas, with various steel products. These products include hot-rolled and cold-rolled coils and sheets, hot-dipped and galvanized coils and sheets, reinforcing bars, billets and blooms, wire rods, strip mill plates, standard and line pipe, and mechanical tubing products. Steel is primarily produced using two methods — Blast Furnace and Electric Arc Furnace. It is regarded as the backbone of the manufacturing industry. The automotive and construction markets have historically been the largest consumers of steel. The housing and construction sector accounts for roughly half of the world’s total steel consumption.
What's Shaping the Future of the Steel Producers' Industry?
Elevated Steel Prices Bode Well: U.S. steel prices recovered in the fourth quarter of 2025, following the lows seen in the third quarter, and the momentum continued in the first quarter of 2026. Overall demand weakness and abundant steel mill output dragged benchmark hot-rolled coil (“HRC”) prices below $800 per short ton in late August and continuing through early September. HRC prices rebounded in the fourth quarter on major steel mills' price increase, extending lead times and tightening supply, partly due to plant outages and reduced imports driven by tariffs. The recovery, which has been more pronounced since November, has led to HRC prices surging to above $1,100 per short ton. Global steel prices have also increased due to supply constraints driven by China’s steel output reductions, as well as price hikes by steel mills amid higher raw material, energy and freight costs triggered by the Middle East Conflict.
Steady Demand in Major Markets: Automotive is a significant market for steel producers. A slowdown in global automotive production curtailed steel consumption in this key end market last year. High interest rates, along with concerns over economic slowdown and tariffs, put pressure on the automotive market. The automotive market is expected to rebound this year, driven by the adoption of electric vehicles as governments globally push for carbon neutrality. Improving affordability, strong demand for hybrids and promotional incentives are expected to drive new vehicle sales. Steel demand in the automotive sector is gaining traction, and the recovery momentum is likely to continue this year as auto build rates increase. Order activities in the non-residential construction market remain strong, underscoring the inherent strength of this industry. Firm demand in non-residential construction is expected to continue, aided by sustained infrastructure spending. In the energy space, pipeline and drilling activities remain steady, aiding demand for tubular steel.
Sluggishness in China a Concern: Steel demand in China, the world’s top consumer of the commodity, has softened due to a slowdown in the country’s economy, following a protracted property crisis and weak global demand. The real estate sector has taken a hard hit amid a decline in new home prices, property investment and housing sales. Notably, real estate accounts for roughly 40% of China's steel consumption. A slowdown in manufacturing activities has led to a contraction in demand for steel in China. The manufacturing sector has taken a beating due to weaker external demand for manufactured goods and a slowdown in infrastructure spending. China has also seen a slowdown in the construction sector. The sluggishness in these key steel-consuming sectors is expected to hurt demand for steel over the short term.
Zacks Industry Rank Indicates Upbeat Prospects
The Zacks Steel Producers industry is part of the broader Zacks Basic Materials Sector. It carries a Zacks Industry Rank #40, which places it in the top 16% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates a bright near-term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Outperforms Sector and S&P 500
The Zacks Steel Producers industry has outperformed both the Zacks S&P 500 composite and the broader Zacks Basic Materials sector over the past year.
The industry has gained 97.3% over this period compared with the S&P 500’s rise of 29.9% and the broader sector’s increase of 39.4%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing steel stocks, the industry is currently trading at 20.67X, above the S&P 500’s 18.76X and the sector’s 13.95X.
Over the past five years, the industry has traded as high as 21.13X, as low as 2.76X and at the median of 8.49X, as the chart below shows.
Enterprise Value/EBITDA (EV/EBITDA) Ratio
Enterprise Value/EBITDA (EV/EBITDA) Ratio
4 Steel Producer Stocks to Watch
Nucor: Charlotte, NC-based Nucor makes steel and steel products with operating facilities in the United States, Canada and Mexico. Nucor is expected to gain from the strength in the non-residential construction market. The company remains focused on achieving greater penetration in the automotive market. Nucor should also benefit from considerable market opportunities from its strategic investments in its most significant growth projects. NUE remains committed to boosting production capacity, which should drive growth and strengthen its position as a low-cost producer. Nucor is maximizing its returns to its shareholders by leveraging its strong balance sheet and cash flows.
Nucor sports a Zacks Rank #1 (Strong Buy). It has an expected earnings growth of 103.8% for 2026. The Zacks Consensus Estimate for NUE’s 2026 earnings has moved up 30.4% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: NUE
Ternium: Based in Luxembourg, Ternium is a leading producer of flat and long steel products in Latin America. It is expected to benefit from healthy demand for steel products and higher steel prices across key markets. Its shipments in Mexico are aided by a recovery in demand in the commercial market following last year’s destocking. Infrastructure projects are expected to contribute to demand, supporting shipments. Demand in automotive remains strong in Brazil, while trade measures taken by the government have led to improved fundamentals in that country. The company is also benefiting from the cost competitiveness of its facilities. It is taking actions to boost liquidity and strengthen its financial position.
Ternium carries a Zacks Rank #1. It has expected earnings growth of 118% for 2026. The consensus estimate for TX’s 2026 earnings has been revised upward by 17.1% over the last 60 days.
Price and Consensus: TX
L.B. Foster: Pennsylvania-based L.B. Foster provides innovative solutions to rail, construction and energy markets to build and maintain their critical infrastructure. L.B. Foster is gaining from a favorable product mix and strategic transformation initiatives. Its business portfolio actions and profitability initiatives are driving results. The company is benefiting from a strong rebound in rail demand, driving volumes in its Rail Products business. FSTR is also seeing strong demand in its Precast Concrete business. FSTR remains committed to its capital allocation priorities while investing in organic growth and acquisition opportunities.
L.B. Foster, carrying a Zacks Rank #1, has expected earnings growth of 152.2% for 2026. The Zacks Consensus Estimate for FSTR’s 2026 earnings has been revised upward by 12.3% over the last 60 days.
Price and Consensus: FSTR
Gerdau: Brazil-based Gerdau is the largest steel producer in Brazil. It is one of the leading producers of long steel in the Americas and special steel globally. GGB is expected to benefit from a rebound in domestic demand for steel and improved prices. The strength in non-residential construction and renewable energy is driving its shipments in North America. The company remains focused on delivering higher-value-added products to the domestic market. Order backlog remains strong in North America, and is likely to continue to drive volumes. Actions to improve product mix are also expected to support sales growth.
Gerdau carries a Zacks Rank #2 (Buy). It has expected earnings growth of 89.7% for 2026. The Zacks Consensus Estimate for GGB’s earnings for 2026 has moved up 7.8% over the last 60 days.
Price and Consensus: GGB
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Nucor Corporation (NUE): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).