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Here's How The US Steel Industry Is Getting Greener

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Wayne Duggan
·2 min read
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The U.S. steel industry is leading the world in turning its business green. In a note out on Friday, Bank of America analyst Timna Tanners said U.S. steel producers like United States Steel Corporation (NYSE: X), Commercial Metals Company (NYSE: CMC) and Steel Dynamics, Inc. (NASDAQ: STLD) already produce some of the world’s greenest steel, and their shift to electric arc furnace (EAF) production will reduce their carbon footprints even further.

Steel Emissions Targets: EAFs are about 75% more emissions-efficient than traditional blast furnace steel mills, according to Tanners. Today, only 28% of global steel production comes from EAFs. The International Energy Agency has said the global steel industry should aim to boost that percentage to 40% by 2030.

Related Link: Cleveland-Cliffs' ArcelorMittal Asset Purchase Could Help Combat 'Steelmageddon'

However, the U.S. steel industry is already paving the path to a greener future, on track to produce more than 80% of its total output via EAFs by 2023.

In addition to lessening its impact on the planet, Tanners says public steel companies have major financial incentives to go green.

“Our equity strategists in early 2020 estimated $20T of asset inflows would be directed into impact investing over the next few decades, with $3T of assets already using climate change in their investment decisions,” she wrote the note.

How To Play It: Steel stocks are going green, but Tanners said that doesn’t necessarily mean steel stock investors will be seeing green in the near future given the pricing pressures the industry is facing. Bank of America has the following ratings and price targets for U.S. steel stocks:

  • U.S. Steel: Underperform rating, $8 target.

  • Commercial Metals: Neutral rating, $22 target.

  • Steel Dynamics: Neutral rating, $40 target.

  • Nucor Corporation (NYSE: NUE): Underperform rating, $45 target.

Benzinga’s Take: The best hope for U.S. steel stock investors in the near-term would be an aggressive infrastructure spending plan from the Biden administration. President-elect Joe Biden has floated the idea of a $2 trillion Build Back Better infrastructure plan that could provide a shot in the arm for steel industry demand.

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