Where is green steel at?

TSLomberd with the note:

We buy a basket of five ‘green steel’ stocks: ArcelorMittal, ThyssenKrupp, SSAB, Fortescueand Voestalpine (MT NA, TKA GR, SSABA SS, FMG AU, VOE AV), equally weighted at 20% each relative to selling the SPDR S&P Metals and Mining ETF. While the green steel movement is still nascent today–saddled with high initial costs, hefty capex commitments and still-lagging regional policy frameworks–its use will become increasingly important to both green technologies and the next phase of infrastructure investment, as climate resilience and carbon accounting is prioritized this decade and beyond. Early movers will have an advantage over latecomers, especially when bolstered by public funding and ambitious climate legislation (as in the EU today), given the sector’s decades-long investment cycle. Joining forces with the GreenDeal, the EU Recovery Plan gives climate transition a central role in the continent’s blueprint for economic recovery and growth. The EU Recovery Plan’s additional stimulus for the period 2021–27 is expected to total around €1.85 trillion, roughly a quarter of which could be allocated to climate transition-related investments. Europe’s drive to green its economy will lead to a new range of opportunities in infrastructure investment.We therefore pinpoint green steel progress as a key leading indicator of longer-term industry growth fundamentals ahead, even if it will not beacore generator of company profits for several years.As for other steel industry metrics, earnings have been upgraded amid a rosy outlook for the sector, aided by a slow future supply pipeline. Valuations have derated significantly and have diverged from the overall market, offering an attractive entry point.

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