The steel industry lost momentum after enjoying a solid run earlier this year as steel prices saw a sharp downward correction in the United States and globally. The downturn in prices put a dent on steel-producing companies’ profitability.

Despite these industry-wide challenges, certain steel companies defied the odds and delivered impressive performances in 2024. These include Carpenter Technology Corporation CRS, Universal Stainless & Alloy Products, Inc. USAP, L.B. Foster Company FSTR and Worthington Steel, Inc. WS.

Price Downturn, Demand Slowdown Weigh on Steel Industry

Steel prices have seen a significant pullback globally in 2024 due to a slowdown in demand and oversupply in the market. Steel production capacities, particularly in major steel-producing countries like China, continue to outstrip demand. In particular, U.S. steel prices tumbled after a strong run in late 2023 that extended into early 2024. The benchmark hot-rolled coil (HRC) prices are down more than 40% since reaching $1,200 per short ton at the start of 2024.

The downside has been influenced by a concoction of factors, including a pullback in steel mill lead times, an oversupply of steel exacerbated by increased imports, reduced demand from key industries and economic uncertainties. Sluggish industrial production and construction activities are also responsible for the decline. While the recent steel mill price hikes have led to a modest uptick in HRC prices, a significant recovery is not expected over the near term given the weak manufacturing backdrop and demand weakness. Prices are currently hovering around the $700 per short ton level.

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. 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. Depressed demand in China and an oversupply in the market have exerted pressure on global steel prices this year. Europe, which has faced persistent economic headwinds and elevated energy costs, has seen sluggish industrial activity, reducing demand for steel products. 

A slowdown in global automotive production curtailed steel consumption in this key end-market this year. The construction sector has experienced a slowdown in the United States due to high interest rates, dampening steel demand in this market. Elevated borrowing costs and inflation have taken a bite out of the residential construction industry. On a positive note, demand from non-residential construction remains resilient with strong order activities. Infrastructure projects in the United States are on the rise, driven by government initiatives to upgrade transportation and utility networks. Firm demand in non-residential construction is expected to continue in 2025.

4 Steel Stocks Worth a Look

While 2024 brought significant hurdles for the steel industry amid declining prices and subdued demand across key markets, a few companies demonstrated remarkable resilience and delivered impressive returns on the bourses. We have taken the help of the Zacks Stocks Screener to shortlist stocks that have gained more than 30% this year. Also, these stocks currently carry a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
 

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You can see the complete list of today’s Zacks #1 Rank stocks here.

Carpenter Technology: Pennsylvania-based Carpenter Technology is benefiting from the ongoing momentum across its end-use markets, including aerospace and defense. Aerospace is gaining from a pickup in global travel. The company’s financial position has been strong, providing it with the flexibility to invest in the emerging technologies of additive manufacturing and soft magnetics. CRS’ cost-reduction initiatives are also anticipated to boost its margins. Improved productivity, product mix optimization and pricing actions are driving profitability. Backed by record backlog levels, its near and long-term outlooks for each end-use market remain positive.

Carpenter Technology, carrying a Zacks Rank #1, has expected earnings growth of 42.2% for fiscal 2025. The Zacks Consensus Estimate for CRS’ fiscal 2025 earnings has been revised upward by 6.6% over the last 60 days. Shares of CRS have shot up 156.5% so far this year.

Universal Stainless & Alloy Products: Based in Pennsylvania, Universal Stainless & Alloy Products, carrying a Zacks Rank #3, is benefiting from strengthening demand in the aerospace market, which is driving its premium alloy sales and the top line. USAP's strategic focus on diversification and innovation is evident in its sales distribution across various end markets. While aerospace is the cornerstone of its success, the company demonstrated adaptability and resilience by achieving growth in sectors such as heavy equipment and general industrial, strengthening its overall market presence. 

Universal Stainless & Alloy Products has an expected earnings growth rate of 522.4% for 2024. It has a trailing four-quarter earnings surprise of roughly 4.4%, on average. Shares of USAP have surged 120.2% so far this year.

L.B. Foster: Pennsylvania-based L.B. Foster is gaining from a favorable product mix and strategic transformation initiatives. Its business portfolio actions and profitability initiatives are driving results. While sustained commercial weakness in the domestic rail market is weighing on sales and margins in FSTR’s Rail Products business, it is seeing solid growth and margin expansion in its Rail Technologies growth platforms. It 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 #3, has expected earnings growth of a staggering 3,146.2% for 2024. The Zacks Consensus Estimate for FSTR’s 2024 earnings has been revised upward by 177.6% over the last 60 days. FSTR’s shares have also rallied 31.5% year to date.

Worthington Steel: Ohio-based Worthington Steel remains focused on delivering value-added solutions to its customers, which supports electrification. It is making investments in the rapidly growing electrical steel market, supporting the transition to a more electrified light vehicle fleet, including hybrid and battery electric vehicles. WS’ expansion projects in Canada and Mexico remain on track with expanded transformer core and electrical steel lamination capacity expected to come onstream at the end of 2025 in those facilities.

Worthington Steel currently carries a Zacks Rank #3. The consensus estimate for WS’ fiscal 2025 earnings has been stable over the last 60 days. It surpassed the Zacks Consensus Estimate in three of the trailing four quarters. WS has a trailing four-quarter earnings surprise of roughly 16.8%, on average. Worthington Steel’s shares have rallied 57.5% year to date.

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