U.S. steelmakers have largely reported second-quarter earnings already, and the theme is similar among them. Steel Dynamics (STLD -0.82%) not only reported record sales, earnings, and cash flow but also announced a new growth investment last week. That helped the stock bounce from recent declines, with investors adding another 4.3% today, as of 2:45 p.m. ET.
Last week, Steel Dynamics, Nucor, and Cleveland-Cliffs all said business remained strong in the second quarter and the outlook for the third quarter is solid. While many business leaders have been expressing concern over a slowing economy, inflation, rising interest rates, and supply chain challenges, steel sector executives had a different take last week. Steel Dynamics CEO Mark Millett summed it up by stating, "Customer order entry activity continues to be healthy across all of our businesses, conflicting with the more pessimistic emotion in the marketplace."
While steel prices have dropped about 50% from 2021 highs spurred by soaring post-pandemic demand, they still remain about double where they sat prior to the pandemic. Steel companies like Steel Dynamics and Nucor are taking advantage of high cash flows to make investments for the future, repurchase shares, and increase dividends to shareholders. Steel Dynamics led the way with a monster 31% dividend boost earlier this year.
Last week the company also said it was using its available cash and cash flow from operations to make a $2.2 billion investment in an aluminum rolling mill. The company estimates the project will begin commercial production in early 2025 and will serve a domestic aluminum industry with an increasing supply deficit.
Investors may not be reacting specifically to that news again today. But combined with the strong current position for the industry, historically high pricing, and investments that should spur future growth, investors are extending steel stocks' earnings bounce this week.