Steel ETFs Strengthen on Positive Outlook for Nucor, Cleveland-Cliffs

Steel sector-related exchange traded funds strengthened on Wednesday as analysts maintained an optimistic outlook on steelmakers like Nucor Corporation (NYSE: NUE) and Cleveland-Cliffs Inc. (NYSE: CLF).

On Wednesday, the VanEck Vectors Steel ETF (NYSEArca: SLX), the lone steel sector-specific ETF, increased 1.7%, and the SPDR Metals & Mining ETF (NYSEArca: XME), which is designed to track the broad metals and mining segment, including a significant tilt toward steel, gained 0.2%.

Meanwhile, Nucor shares increased 4.4% and Cleveland-Cliff advanced 4.5%. NUE makes up 8.2% of SLX’s underlying portfolio and 4.3% of XME. CLF makes up 4.7% of SLX and 4.5% of XME.

Bolstering Nucor shares, CNBC’s Jim Cramer recommended the steelmaker for 2022 and raised his price target for his Investing Club. Cramer also added that he holds Nucor in his charitable trust, and CNBC contributor Joe Terranova also said that he backs the shares.

“This is a cheap stock and this is a stock that’s breaking out technically and it’s liquidating the pessimism,” Terranova said on CNBC. “I’m very willing to step into that trade right here with the stock trading somewhere around $125 I think it goes a lot higher, I really do.”

Additionally, Cerity Partners’ Jim Lebenthal named Cleveland-Cliffs Inc. his top pick for 2022.

“These guys are just going to be minting free cash flow all year long,” Lebenthal said on CNBC’s “Fast Money Halftime Report.”

Steelmakers have been expanding their production in bid to meet the surge in demand. Nucor Corp, Cleveland-Cliffs Inc., and North Star BlueScope Steel spent over $1 billion for steel scrap processors in 2021 as millions of tons of annual production capacity are being added to the domestic steel market in response to rising demand, the Wall Street Journal reports.

The record high prices for steel and an almost 20% surge in U.S. steel production over the past year have pushed steel companies to expand their businesses. About 10 million tons per year of new capacity for flat-rolled steel is projected to come online by the end of 2024 in addition to the 8 million tons already implemented during the past two years.

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