The market expects Commercial Metals (CMC) to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended May 2025. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released ...

Investment Rating - The report has shifted its near-term investment pecking order to prioritize steel over other materials, indicating a positive outlook for the steel industry [1]. Core Insights - Market expectations for a demand recovery in China remain cautious, with a focus on tracking high-frequency on-ground demand trends [1]. - Steel production in China has decreased by 2.4% week-over-week (WoW) and 4.3% year-over-year (YoY) for the week of June 6 to June 12, totaling 8.6 million tons [2]. - China's steel inventory as of June 12 was 13.5 million tons, down 0.7% WoW and 23.3% YoY, indicating a tightening supply [3]. - Apparent steel consumption in China for the same week was 8.7 million tons, reflecting a decline of 1.6% WoW and 2.3% YoY [4]. Production Summary - Total steel production from the beginning of the year until now stands at 204.2 million tons, which is a decrease of 1.1% YoY [2]. - Specific production figures for rebar, hot-rolled coil (HRC), and cold-rolled coil (CRC) are 51 million tons, 76.5 million tons, and 20.7 million tons respectively, with varying YoY changes [2]. Inventory Summary - The inventory breakdown shows that steel mills hold 4.3 million tons and traders hold 9.3 million tons, with significant YoY reductions in both categories [3]. - The total inventory for rebar, HRC, and CRC is 5.6 million tons, 3.5 million tons, and 1.4 million tons respectively, with notable declines in rebar and CRC inventories YoY [3]. Consumption Summary - Year-to-date apparent consumption of steel in China is 201.6 million tons, which is a slight decrease of 0.3% YoY [4]. - The apparent consumption figures for rebar, HRC, and CRC year-to-date are 49.3 million tons, 76.2 million tons, and 20.8 million tons, showing mixed YoY performance [4].

Industry Overview - The S&P Steel Index is experiencing growth in 2025, driven by tariff leverage, strong balance sheets, and high returns on capital [1] - As of June 12, the S&P Steel Sub-Industry Index has increased by 8.40% year to date, indicating stabilization in the US steel sector [1] - President Trump's decision to double US steel import tariffs from 25% to 50% on June 4, 2025, is a significant factor contributing to this growth [1][2] Tariff Impact - The announcement of the tariff increase led to immediate gains in steel stocks, with Cleveland-Cliffs rising 26% in one day, while Steel Dynamics and Nucor saw increases of 10-11% [2] - Benchmark steel prices rose from $725 per metric ton before the tariff announcement to $875 per metric ton currently, effectively raising the price floor for domestic steel [2] Market Dynamics - The steel industry's rally is attributed to both short-term catalysts and long-term structural forces, including federal spending on infrastructure and reshoring efforts [3] - Supply chain restocking, recovery in the auto sector, and disciplined capital returns from leading companies like Nucor and Steel Dynamics contribute to a more stable sector profile [3] Construction and Demand - Domestic construction activity is robust, particularly in commercial construction, which supports demand for structural steel despite higher interest rates [7] - Key steel-consuming industries, such as automotive and machinery manufacturing, are showing resilience, while renewable energy infrastructure expansion creates new demand for steel [7] Company Highlights - Nucor, trading at $121 per share with a 1.82% dividend yield, is noted for its industry-leading margins and strong balance sheet, despite recent volatility due to tariff negotiations [9] - Steel Dynamics, priced at $133 per share with a 1.50% dividend yield, has shown a 16.7% increase year to date and is recognized for its operational efficiency and low production costs [10][11] - ArcelorMittal, trading at $30 per share with a 1.55% dividend yield, has seen a 30.6% increase year to date and is expected to benefit from strategic acquisitions and joint ventures [12][13] Investment Considerations - Investors are advised to focus on companies with high-margin, value-added products and sustainable dividend growth rather than chasing commodity pricing volatility [14] - Strong fundamentals, including cost-efficient production, strong returns on capital, and quality net margins, are essential for evaluating steel stocks [16]

Core Insights - Friedman Industries reported improved margins and a record sales volume for the fourth quarter of fiscal 2025, with a 28% increase in sales volume compared to the previous quarter and a 5% increase year-over-year [3][4] - The company achieved net earnings of approximately $6.1 million for fiscal 2025, despite challenging steel price trends and economic factors [3][5] - The company's sales volume remained stable at approximately 500,000 tons for the year, reflecting resilience amid various challenges [3][5] Quarterly Performance - For the quarter ended March 31, 2025, net earnings were approximately $5.3 million ($0.76 diluted earnings per share) on sales of approximately $129.2 million, compared to net earnings of approximately $5.0 million ($0.71 diluted earnings per share) on sales of approximately $132.2 million for the same quarter in 2024 [4][7] - Sales volume increased from approximately 159,000 tons in the 2024 quarter to approximately 166,500 tons in the 2025 quarter [4][7] Annual Performance - For the fiscal year ended March 31, 2025, net earnings were approximately $6.1 million ($0.87 diluted earnings per share) on sales of approximately $444.6 million, down from net earnings of approximately $17.3 million ($2.39 diluted earnings per share) on sales of approximately $516.3 million for fiscal 2024 [5][7] - The working capital balance at year-end was $128.1 million [7] Segment Operations - Flat-roll segment sales for the 2025 quarter totaled approximately $117.7 million, with a sales volume of approximately 139,000 tons from inventory and 16,500 tons of toll processing [10] - Tubular segment sales for the 2025 quarter totaled approximately $11.5 million, with tons sold increasing from approximately 9,500 tons in the 2024 quarter to approximately 11,000 tons in the 2025 quarter [11] Hedging Activities - The company recognized a gain on hedging activities of approximately $1.8 million for the 2025 quarter and a total hedging gain of approximately $7.6 million for fiscal 2025 [12] Outlook - For the first quarter of fiscal 2026, the company expects sales volume to be slightly lower than the fourth quarter of fiscal 2025 due to equipment downtime, but anticipates improved margins [13]

Group 1 - POSCO Holdings has established the Australia Critical Minerals R&D Lab in Perth to enhance technological competitiveness in steel, battery materials, raw materials, and rare earth industries [1][8] - The lab aims to integrate Australia's resources with POSCO's materials technology, adding value to core businesses and serving as a strategic hub for raw material processing and critical mineral acquisition [2][4] - The necessity of localization methods in the steel and battery materials industries has been recognized, focusing on cost-effective raw material procurement and technological competitiveness in carbon reduction [3][4] Group 2 - The R&D lab will focus on critical mineral research and development, including partnerships with local raw material companies and research institutions to advance low-carbon steel raw material utilization and cost-cutting technologies in lithium and nickel sectors [4][8] - Research will also include rare earth supply chains and high-efficiency separation and refining technologies to explore next-generation mineral business opportunities and promote investment in global mines through local knowledge exchange [4][8] Group 3 - Over the past year, shares of POSCO Holdings (PKX) have decreased by 27.7%, slightly underperforming the industry average decline of 27.3% [6]

Core Viewpoint - Cleveland-Cliffs' stock price has declined significantly due to new trade negotiations that may reduce steel tariffs on imports from Mexico, raising concerns about the company's profitability and market position [1][4]. Group 1: Steel Tariffs and Trade Negotiations - New trade negotiations between the U.S. and Mexico could potentially roll back the recently announced 50% tariffs on steel imports from Mexico [1][3]. - The proposed changes would allow a specific quota of steel imports from Mexico to enter the U.S. duty-free or at a reduced tariff rate, while imports exceeding this quota would still incur the 50% tariff [3]. Group 2: Impact on Cleveland-Cliffs - The mere speculation of a tariff reduction for Mexican steel has shaken investor confidence in Cleveland-Cliffs, as it raises the possibility of similar negotiations with other countries [4]. - Cleveland-Cliffs has been relying on tariff policies to regain profitability after incurring a loss of $754 million in the previous year [5]. - The company faces additional challenges from domestic competition, particularly from U.S. Steel, which will soon receive financial backing from Japan's Nippon Steel [5].

Investment Rating - The industry investment rating is In-Line [5]. Core Insights - The United States and Mexico are negotiating a trade deal to remove the 50% tariff on steel imports, allowing Mexico to export tariff-free steel to the US up to a certain volume [1]. - The US was a net exporter of steel to Mexico in 2024, exporting approximately 4.78 million tons while importing around 3.51 million tons [4]. - The potential shift to a tariff-rate quota (TRQ) system for Mexico could negatively impact long steel producers, as Mexico is a net exporter of rebar and wire drawn products [3]. Summary by Sections Section 232 Overview - Section 232 was enacted in 2018, imposing a 25% tariff on all steel imports and 10% on aluminum, with exemptions granted to Canada, Mexico, and Australia [2]. - In early June 2025, President Trump reinstated a 50% tariff on steel and aluminum imports, removing all prior exemptions [2]. Trade Dynamics - In 2024, the US imported approximately 154,000 tons of rebar from Mexico but exported only about 4,000 tons, indicating a significant trade imbalance in this category [4]. - The US imported around 233,000 tons of wire rod from Mexico while exporting just 45,000 tons, further highlighting the trade dynamics [4]. Company Ratings - Cleveland-Cliffs Inc (CLF.N): Equal-weight rating as of February 15, 2024, with a price of US$8.02 [56]. - Commercial Metals Company (CMC.N): Equal-weight rating as of December 19, 2024, with a price of US$50.67 [56]. - Nucor Corp (NUE.N): Overweight rating as of August 14, 2024, with a price of US$124.68 [56]. - Steel Dynamics Inc (STLD.O): Overweight rating as of March 7, 2025, with a price of US$133.81 [56]. - US Steel (X.N): Equal-weight rating as of February 3, 2025, with a price of US$53.89 [56].

Core Points - Nucor Corporation declared a quarterly cash dividend of $0.55 per share, marking its 209th consecutive quarterly cash dividend [1] - The dividend is payable on August 11, 2025, to stockholders of record on June 30, 2025 [1] Company Overview - Nucor and its affiliates are manufacturers of steel and steel products, operating in the United States, Canada, and Mexico [2] - The company produces a wide range of products including carbon and alloy steel in various forms, as well as fabricated concrete reinforcing steel and metal building systems [2] - Nucor is recognized as North America's largest recycler and also brokers ferrous and nonferrous metals, pig iron, and hot briquetted iron [2]

Market Overview - The Green Steel Market was valued at USD 7.4 Billion in 2024 and is projected to reach USD 19.4 Billion by 2029, with a CAGR of 21.4% [1] - The rising sustainability and growing demand for steel make green steel an attractive alternative, significantly increasing its potential in the global market [2] Environmental Impact - Traditional steel manufacturing is energy and carbon-intensive, contributing to about 7% of global carbon dioxide emissions [3] - Green steel production aims to reduce carbon emissions through innovative technologies and renewable energy sources [4][5] Production Techniques - Green steel can be produced using various techniques, including electric arc furnaces, hydrogen-based production, and other fossil-free processing methods [6] - The use of low-carbon energy sources, such as green hydrogen, is essential for transforming the steel industry towards sustainable practices [5][8] Market Drivers and Opportunities - Government support through policies and funding initiatives is expected to propel the development of green steel technologies [7] - Significant investments from leading steel manufacturers are driving the transition to environmentally friendly practices [6] Technological Advancements - Hydrogen-based direct reduction of iron (HDRI) is a leading technology, replacing coal with green hydrogen and producing water instead of CO2 [8] - The Swedish company H2 Green Steel secured $4.54 billion in financing to build a large-scale green steel plant, aiming to produce 5 million tons annually by 2030 [8] Market Segmentation - The green steel market is segmented by processing technique, end-use industries (such as building and construction, transportation, and machinery), and geographic regions [21]

Core Viewpoint - Steel stocks are gaining attention following President Trump's announcement of 50% tariffs on imported steel, with Nucor Corp identified as a top pick by JPMorgan, suggesting a potential 67% upside [1]. Group 1: Company Analysis - Nucor is well-positioned to benefit from the recent tariffs due to its product diversification and lower exposure to underperforming value-add sheet products [2]. - Nucor's focus on plate and rebar, which are performing better, could lead to incremental upside as these prices hold strong [2]. - Nucor's utilization rate was 80% in the first quarter, which is lower than Steel Dynamics' 89% but significantly higher than U.S. Steel Corp's 65% in the Flat-Rolled division, indicating potential for improvement [5]. Group 2: Market Sentiment - Despite a 10% increase in Nucor's stock since the tariff announcement, investors remain cautious due to potential tariff exemptions for USMCA partners Canada and Mexico [3]. - JPMorgan does not anticipate a summer rally for steel prices but sees a firm price floor due to easing scrap costs and rising mill utilization [4]. - The steel market is characterized by a dichotomy of near-term caution and long-term potential, with Nucor favored in the long run if tariffs remain in place and restocking occurs later this year [5][6].