7 Best Copper and Steel Stocks to Watch Now

Copper and steel are old industries, but they’ll be key to the new green economy as the world transitions from coal, oil and natural gas to renewable energy sources like wind farms, solar panels and green hydrogen. Unlike with fossil fuels, markets don’t have a clear path to transition off of copper and steel, key ingredients in buildings, automobiles and appliances. “The transition to clean energy and EVs certainly provides a long-term boost to copper, while rising oil prices have resulted in countries looking to speed up the transition, increasing copper demand,” says Sam Boughedda, senior stock market analyst at AskTraders.com. “Even so, the current economic outlook is still uncertain, which means we are currently sitting on the sidelines with our view.” Here are seven top copper and steel stocks to put on your watch list:

— Fortescue Metals Group Ltd. (ticker: FSUGY)

— Ternium SA (TX)

— BHP Group Ltd. (BHP)

— Steel Dynamics Inc. (STLD)

— Nucor Corp. (NUE)

— Southern Copper Corp. (SCCO)

— Freeport-McMoRan Inc. (FCX)

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Fortescue Metals Group Ltd. (FSUGY)

This Australian company is a case in point for straddling the old and new. It’s one of the largest iron ore miners in the world, shipping a company record of 189 million metric tons of the steelmaking ingredient during its 2022 fiscal year that ended on June 30. But it’s also investing in a portfolio of green energy projects, decarbonization technologies and manufacturing assets around the globe. The company is investing more than $6 billion in these efforts, which include the use of green hydrogen to power its mining operations. Hydrogen created with renewable electricity will ultimately save the company money on diesel fuel, natural gas and carbon offset purchases. The move is likely to be viewed favorably by investors focused on environmental attributes instead of just the bottom line.

Ternium SA (TX)

This European company is a leading producer of steel products in Latin America, with operations in Mexico, Brazil, Argentina and other countries including the southern United States. It has customers in the automotive, home appliances, construction and energy industries, among others. The company has cost-competitive facilities and is working to bolster its financial position after the pandemic, investing research service Zacks says. “Its shipments in Mexico are likely to be aided by healthy demand from industrial and commercial customers,” according to Zacks. “Healthy demand for construction materials is also expected to support shipments in Argentina.”

BHP Group Ltd. BHP

The largest miner in the world by stock market value, BHP is a major copper producer and sells coal used in steelmaking. But it’s iron ore that brings the company the most revenue of any single commodity it produces. As a large and diversified miner, BHP likely has the cushion needed to ride out a commodities slump. The company is planning to grow its copper business through exploration as well as boosting its iron ore production, now that it has secured an increase to an environmental license to expand port operations in the Australian state of Western Australia.

Steel Dynamics Inc. (STLD)

The good news for this steelmaker is that, according to a third-quarter outlook the company released in the middle of September, raw material costs should be lower and shipments higher. But the bad news is that profitability from the company’s steel operations is expected to be significantly lower than the second quarter of this year because of lower earnings from flat-rolled steel operations. Still, those earnings are expected to be strong compared with historical standards, even though flat-rolled steel prices have been moving lower after a massive rally in 2021.

“The company expects flat-rolled-steel prices to stabilize as broad underlying steel demand and corresponding order activity remains intact from the automotive, construction, industrial and energy sectors,” Steel Dynamics’ outlook said. Meanwhile, recycling operations earnings are expected to be below sequential second-quarter results, while earnings from steel fabrication are expected to be meaningfully higher than record second-quarter results.

Nucor Corp. (NUE)

The day before Steel Dynamics put out its outlook, competitor Nucor released its own third-quarter guidance that was similarly mixed but generally upbeat. Metal margin contraction and reduced shipping volumes are expected to push its steel mills segment earnings “considerably lower” compared with the second quarter. But with another strong quarter expected for its steel products segment and similar quarterly sequential performance from its raw materials segment, they “continue to believe that 2022 will be the most profitable year in Nucor’s history.” The company’s steel mills segment is involved with sheet, bar, structural and plate items. Its steel products segment includes steel joists, concrete reinforcing steel and steel fasteners. Its raw materials segment involves ferrous and nonferrous metals.

Southern Copper Corp. (SCCO)

This Mexico- and Peru-focused copper miner produces the metal at a relatively low cost, has sizable reserves, has the backing of Mexican conglomerate Grupo México (GMBXF) and has copper supply chain operations beyond extraction. “We like Southern Copper as its exploration and mining units are complemented by refining, smelting and processing plants, meaning its revenue stream is relatively well diversified,” says Boughedda. “In addition, it has a strong foothold in helping copper producers exploit the booming renewables sector.” Southern Copper says it has the largest copper reserves in the industry. To a much lesser extent than the red metal, it also produces molybdenum, zinc, silver and gold.

Freeport-McMoRan Inc. (FCX)

This is one of the largest copper miners in the world and is a major producer of molybdenum, which is used to alloy steel. Being heavily exposed to copper, which has softening short-term demand, has helped push its shares down more than 28% year to date as of Oct. 6. But with the long-term demand outlook bright for the metal, Freeport is worth considering. “The outlook for copper fundamentals in the medium and long term remain extraordinarily favorable, with demand for copper expected to double over the next 10 to 15 years,” the company said in its second-quarter report. “Substantial new mine supply development will be required to meet the goals of the global energy transition, and current prices for copper are insufficient to support new mine supply development, which is expected to add to future supply deficits.”

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7 Best Copper and Steel Stocks to Watch Now originally appeared on usnews.com

Update 10/07/22: This story was published at an earlier date and has been updated with new information.

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