One item that was included in the State of the Union speech but did not gain a lot of traction during the following media claw-through was the fact that both the Republicans and the Democrats know that the United States is in great need of infrastructure repair and replacement. With crumbling bridges and roadways, out-of-date airports, an old electricity grid and countless other projects to attend to, it’s a good bet that steel demand will spike higher in the coming years.

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A new Deutsche Bank research report notes that steel prices finally are starting to rise again after falling from last summer’s highs. The report noted this:

The world export for hot rolled coil steel price is likely to remain supported by the recent rally in the seaborne iron ore price. Given the lack of arbitrage, sheet imports into the US should trend lower and domestic pricing could see some moderate traction from the announced price hike. The magnitude of any increase will be dependent on improvement in ordering activity (though customers would seek mills to pass on any decline in prime scrap costs for February). The NYMEX future curve has moved higher in the past month, with second quarter 2019 contracts trading at ~$725/st.

These four stocks are rated Buy at Deutsche Bank and look like solid picks for growth investors looking to add shares.

Commercial Metals

This lesser known stock provides solid value for investors at current trading levels. Commercial Metals Co. (NYSE: CMC) manufactures, recycles and markets steel and metal products and related materials and services in the United States and internationally.

As one of the leading suppliers to the nonresidential construction sector, Commercial Metals has revived as that area of the market has picked up. The U.S. Architecture Billings Index, an economic indicator that provides nine-to-12-month growth forecast of nonresidential construction spending activity, has shown very consistent growth, and that bodes well for the company.

Shareholders receive a 2.96% dividend. The Deutsche Bank price target on the shares is $22, while the Wall Street consensus is $21.36. The shares closed Thursday at $16.23, down over 6% on the day.

Nucor

This top steel company could continue to do very well if the economy sees continued strength this year and nonresidential construction grows. Nucor Corp. (NYSE: NUE) is one of North America’s largest steel producers, with almost 27 million tons of finished steel capacity at 23 mini-mills throughout the United States. The company’s downstream steel products business includes rebar fabrication, steel joists/deck, cold finished bars, fasteners, building systems and wire mesh. Nucor also has 5 million tons of scrap processing capacity.

Nucor has always kept a very conservative balance sheet and is poised for slow but steady growth next year and beyond, especially if a huge infrastructure build-out becomes a reality. In addition, global weather catastrophes have also helped continue to drive the need for steel products.

Nucor investors receive a 2.70% dividend. Deutsche Bank has a $65 price target, and the consensus target is higher at $70.43. The stock closed at $59.34 on Thursday.

Ryerson

This top small-cap play could make sense for more aggressive accounts. Ryerson Holdings Inc. (NYSE: RYI) offers a line of stainless steel, aluminum, carbon steel and alloy steels, as well as nickel and red metals in various shapes and forms, including coils, sheets, rounds, hexagons, square and flat bars, plates, structurals and tubings.

The company also provides value-added processing and fabrication services, such as sawing, slitting, blanking, cutting to length, leveling, flame cutting, laser cutting, edge trimming, edge rolling, roll forming, tube manufacturing, polishing, shearing, forming, stamping, punching, rolling shell plate to radius and processing materials to a specified thickness, length, width, shape and surface quality pursuant to specific customer orders.

The $10 Deutsche Bank price target compares with the $8.92 consensus target and the most recent close at $7.16, after dropping over 5.5% on the day.

Steel Dynamics

This is another steel company on which Deutsche Bank remains very positive. Steel Dynamics Inc. (NASDAQ: STLD) operates six steel mini-mills in Indiana, Virginia, Mississippi and West Virginia. Production capacity has been nearly 10 million tons, of a total 110 million U.S. capacity.

The company makes flat-rolled products, special/merchant bars and structural steel products. Steel Dynamics can process about 7 million tons of ferrous scrap and has a downstream operation that processes finished steel.

Shareholders are paid a 2.08% dividend. The Deutsche Bank price target is $44. The $36 consensus estimate compares with Thursday’s close at $36.79.

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With pricing firming, and export potential and demand at home still strong, these stocks make sense for growth investors, especially after significant price pullbacks. A big initiative for an infrastructure build-out could significantly move the sector, as would a trade deal settlement with China.

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