From Mill to Market: Let’s Look at These Canadian Steel Stocks

ByDan Kent Published On:

Key takeaways

Steel Demand is Tied to Economic Growth: The steel industry benefits from strong infrastructure spending, automotive production, and industrial activity, making companies like Algoma Steel and Stelco well-positioned for growth during economic expansions.

Green Steel is the Future: The shift toward lower-emission steel production, including electric arc furnaces and high-grade iron ore pellets, is creating new opportunities for companies like Algoma Steel and Labrador Iron Ore, which are aligning with global decarbonization efforts.

Cyclicality and Price Volatility Matter: Steel and iron ore prices fluctuate based on global demand, trade policies, and raw material costs, making companies like Russel Metals vulnerable to economic downturns but also primed for strong gains when market conditions improve.

3 stocks I like better than the ones on this list.

One of the richest men in history struck gold in the steel business.

Andrew Carnegie arrived in the United States as a penniless 12-year-old in 1848 and immediately got to work. After a stint in the railroad business, Carnegie started investing in the steel industry in the 1870s, using his connections in local railroads to get sweetheart rail contracts.

By the 1890s, Carnegie Steel was the largest steel company in the nation, eventually merging with various competitors to create the mammoth U.S. Steel.

More than 100 years later, steel is integral to the world’s economy. Asia has become a significant producer as nations like China use modern production capabilities to build vast tracts of high rises. Steel is also used to manufacture heavy machinery, weapons, and energy products for the energy industry. 

Canada’s steel industry has also seen significant changes over the years. Stelco dominated the space for years, but the Hamilton-based steel producer faced substantial challenges that eventually culminated in its bankruptcy. Then, it was acquired by Cleveland Cliffs in 2024.

ArcelorMittal became the largest steel producer in Canada after its 2006 acquisition of Dofasco. The Luxembourg-based company is also the world’s largest producer, operating in all sorts of global markets. It is not the largest producer anymore, coming in at 2nd, but is still a dominant force.

Just know that investing in steel stocks, or any commodity based stock for that matter, is not recommended for beginners. They have complex, cyclical business models. If you’re looking for beginner type stocks, have a read of this article.

Let’s take a closer look at some Canadian stocks in the steel industry, including the five best steel stocks Canadians may want to add to their portfolio.

What are the top Canadian steel stocks to buy right now?

Passive income play on iron ore

Labrador Iron Ore Royalty Corp (TSE:LIF)

Labrador Iron Ore Royalty Corporation (LIF) is a royalty company that holds a stake in the Iron Ore Company of Canada (IOC), one of the country’s largest producers of high-grade iron ore pellets. Instead of mining itself, LIF earns royalties and dividends from IOC’s operations, making it a unique way to gain exposure to iron ore prices while benefiting from steady cash flow.

P/E: 11.0

5 Yr Revenue Growth: 3.2%

5 Yr Earnings Growth: -3.2%

5 Yr Dividend Growth: 24.6%

Yield: 10.0%

  • Holds a 15.1% equity stake in IOC and collects a 7% gross revenue royalty.
  • High-grade iron ore pellets are in demand for low-emission steel production.
  • Strong cash flow generation supports a high dividend yield.
  • Benefiting from global infrastructure spending and steel demand.
  • Operates in a politically stable, resource-rich jurisdiction.
  • Requires minimal operational involvement, reducing direct business risks.
  • Iron Ore Price Movements: Rising steel demand will drive higher iron ore prices, boosting royalties.
  • Green Steel Transition: Increased use of high-grade iron ore in low-emission steelmaking benefits LIF.
  • IOC Production Efficiency: Any disruptions or improvements in production will impact earnings.
  • Dividend Sustainability: Tracking cash flow and royalty payments will indicate future dividend strength.
  • Iron Ore Price Volatility: A decline in global iron ore prices would reduce revenue and dividends.
  • Operational Dependence on IOC: Any production issues at IOC would directly impact LIF’s earnings.
  • Dividend Uncertainty: Payouts fluctuate with iron ore prices, leading to income variability.
  • Global Demand Fluctuations: Economic slowdowns could reduce steel production and lower royalties.

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Leading metals distributor in North America

Russel Metals (TSE:RUS)

Russel Metals is one of Canada’s largest metals distribution companies, supplying steel, aluminum, and other industrial metals to customers across North America. The company operates in three key segments: metals service centers, energy products, and steel distribution, making it a diversified player in the steel supply chain.

P/E: 14.5

5 Yr Revenue Growth: 3.0%

5 Yr Earnings Growth: 17.3%

5 Yr Dividend Growth: 1.8%

Yield: 4.3%

  • Diversified revenue streams across metals distribution, processing, and energy products.
  • Strong market position with a wide customer base across multiple industries.
  • Steady dividend payer, appealing to income-focused investors.
  • Well-positioned to benefit from North American infrastructure spending.
  • Recent acquisitions have expanded its footprint in high-growth markets.
  • Prudent financial management allows for strategic growth investments.
  • Steel Demand Trends: Industrial production and construction growth will drive steel consumption.
  • Infrastructure Spending: Government-led investments in bridges, roads, and pipelines boost demand.
  • Energy Sector Growth: Rising oil and gas activity supports demand for Russel’s energy-related products.
  • Mergers & Acquisitions: Expansion through acquisitions could provide new revenue streams.
  • Cyclical Industry Exposure: Demand fluctuates with economic cycles, affecting profitability.
  • Supply Chain Disruptions: Logistical bottlenecks could impact inventory levels and costs.
  • Interest Rate Sensitivity: Higher rates may slow construction activity, affecting steel demand.
  • Raw Material Price Volatility: Fluctuations in steel and aluminum prices could impact margins.

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Niche steel manufacturer for construction and industrial uses

Tree Island Steel (TSE:TSL)

Tree Island Steel specializes in manufacturing wire products, nails, and other fabricated steel products used in construction, agriculture, and industrial applications. The company operates primarily in North America, serving residential and commercial construction markets with reinforcing steel, fencing, and fasteners.

P/E: –

5 Yr Revenue Growth: -%

5 Yr Earnings Growth: -%

5 Yr Dividend Growth: -%

Yield: -%

  • Strong demand from the construction and home renovation sectors.
  • Niche focus on wire and fastener products provides pricing power.
  • Exposure to infrastructure projects requiring reinforcing steel.
  • Conservative balance sheet with manageable debt levels.
  • Well-established brand with long-term industry relationships.
  • Potential beneficiary of North American reshoring trends in manufacturing.
  • Construction Market Strength: Residential and commercial building activity drives demand for its products.
  • Raw Material Costs: Steel wire price fluctuations impact manufacturing costs and margins.
  • Infrastructure Investments: Government spending on roads and bridges boosts demand for reinforcing steel.
  • Supply Chain Stability: Access to raw materials and distribution channels is crucial for profitability.
  • Cyclical Demand Fluctuations: Sensitive to downturns in construction and industrial activity.
  • Raw Material Cost Pressures: Rising input costs could squeeze margins.
  • Competition from Imports: Lower-cost international suppliers could impact pricing power.
  • Interest Rate Increases: Higher borrowing costs could slow construction activity.

Canadian steelmaker undergoing modernization

Algoma Steel (TSE:ASTL)

Algoma Steel is one of Canada’s largest integrated steel producers, supplying hot and cold rolled steel to industries such as automotive, construction, and energy. The company is in the process of transitioning to electric arc furnace (EAF) technology, which will significantly reduce emissions and enhance efficiency.

P/E: –

5 Yr Revenue Growth: -1.2%

5 Yr Earnings Growth: -%

5 Yr Dividend Growth: -%

Yield: 3.4%

  • Transitioning to electric arc furnace technology for lower costs and emissions.
  • Benefiting from strong demand in automotive and construction industries.
  • Government-backed funding supports its green steel initiatives.
  • Competitive cost structure with access to key raw materials.
  • Positioned to benefit from North American steel supply chain realignments.
  • Strong balance sheet with a focus on capital investment and modernization.
  • EAF Transition Progress: Successful implementation of electric arc furnaces will improve cost efficiency.
  • Steel Pricing Environment: Market trends in steel prices will directly impact revenue.
  • Government Incentives: Public funding for green steel initiatives will support long-term growth.
  • Automotive Sector Demand: Car manufacturing trends affect demand for Algoma’s products.
  • Transition Execution Risk: Delays or cost overruns in EAF conversion could impact profitability.
  • Market Cyclicality: Exposure to volatile steel demand from construction and automotive industries.
  • Environmental Regulations: Changing emissions policies may require further investments.
  • Competition from Imports: Lower-cost international steel could put pressure on pricing.

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