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12 Stocks At Risk Of Rising Steel Costs

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12 Stocks At Risk Of Rising Steel Costs

Spot HRC (hot rolled coil) have gained around 40 percent since bottoming in the middle of October to around $800/ton, KeyBanc Capital Markets' analysts said in a research report. Meanwhile, spot plate prices are up around 25 percent from their average 2017 price and spot bar and structural products are up 10 to 20 percent over the same time period.

The Analysts

KeyBanc's Phil Gibbs, Steve Barger, Jeff Hammond, Tahira Azfal, Ken Zener, and Adam Josephson published an industry wide research report into steel inflation across the entire industrial and materials sectors.

The Thesis

Companies buying steel on contracts (one, three, and six-month lags) will likely see the full impact on rising steel costs, the analysts said in the report. Even auto makers who negotiate steel on an annual period benefited from buying the commodity at prices "well below" spot prices but now the contractual period is "well past over."

Looking forward to 2018, it's likely HRC pricing could move as high as $1,000/ton based on historical pricing spikes, the analysts said. This would impact the following companies who are most exposed to inflationary steel costs:

  • Machinery: Terex Corporation (NYSE: TEX) and Oshkosh Corp (NYSE: OSK).
  • Diversified: Regal Beloit Corp (NYSE: RBC), Flowserve Corp (NYSE: FLS) and Middleby Corp (NASDAQ: MIDD).
  • E&C: Babcock & Wilcox Enterprises Inc (NYSE: BW), Sterling Construction Company, Inc. (NASDAQ: STRL), Tutor Perini Corp (NYSE: TPC), and McDermott International Inc (NYSE: MDR).
  • Other: Whirlpool Corporation (NYSE: WHR), Greif, Inc. (NYSE: GEF), and Gibraltar Industries Inc (NASDAQ: ROCK)

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