Nucor: 'Build Back Better' Bill Setback And Weak Economic Growth May End Steel's Rally

Summary

• On Monday, Nucor and other steel producers crashed after Biden's infrastructure bill became unlikely to pass.
• Steel prices have declined since September as China's consumption outlook crashed due to property developer woes.
• The outlook for U.S. steel demand has weakened due to prolonged declines in automobile production and a potential peak in construction spending.
• Nucor is still my favorite due to its more stable long-run growth strategy and generally attractive valuation compared to peers.
• Investors may want to temporarily reduce exposure to Nucor and its peers as the steel market may return to glut dynamics due to declines in the demand outlook.

Editor's Note: This article was amended on 12/27/21 to reflect a clarification in the title.

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The steel industry has been on fire since last year. The steelmaker ETF (SLX) is 34% above pre-COVID levels, while top

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.