3 Steel Stocks to Sell Now on Rising Input Costs and Interest Rate Fears

Economic Overview - The inflation rate as of March is 3.5%, leading to concerns about steel stocks due to their cyclical nature and heavy debt loads [1] - Anticipation of at least three rate decreases in 2024 created a favorable market environment in the first quarter, but recent inflation data has shifted sentiment [1] ArcelorMittal (MT) - ArcelorMittal has a significant global presence but carries a heavy debt load, making it vulnerable to economic downturns and high loan rates [2] - The company incurred $715 million in interest charges recently, up from $357 million in December 2021, while U.S. metal sheet prices have fallen to approximately $800/ton [2] - Despite a 153% profit beat in its latest quarterly results and expansion into India's steel market, the heavy debt and recent stock surge suggest it is a stock to sell [3] United States Steel Corporation (X) - U.S. Steel has seen its long-term debt increase from $2.7 billion to $3.9 billion since December 2017, making it more susceptible to market declines [5] - The expected revenue growth rate for U.S. Steel is -5.5% over the next 3 to 5 years, underperforming compared to 82.5% of its peers [5] - High interest rates are expected to limit EPS growth, and older steel mills face challenges in competing with newer facilities [5] Cleveland-Cliffs (CLF) - Cleveland-Cliffs attempted to acquire U.S. Steel for approximately $9 billion, but market skepticism about the merger's success led to volatility in its stock price [7] - The company reported a revenue decline from $23.0 billion to $22.0 billion year-over-year but managed to reduce net debt and achieve significant free cash flow [8] - Despite operational successes, Cleveland-Cliffs has increased its debt to around $3 billion, raising concerns about financial strain in a worsening economy [8]