Essential Materials in Focus – Steel, Copper, and Cement

This is our last Materials in Focus newsletter. Once again, a reminder below that we categorized raw materials into three investment-relevant groups:

1. Strategic Materials – Rare Earth Elements (REEs), Semiconductors, and Lithium
   Vital for national defense and advanced technologies, yet heavily reliant on foreign supply chains.
2. Critical Materials – Cobalt, Graphite, and Aluminum
   Essential for energy storage and transportation, with vulnerable domestic sourcing.
3. Essential Materials – Steel, Copper, and Cement
   The foundational components of industrial infrastructure.

Spotlight on Essential Materials: Steel, Copper, and Cement

Research suggests that demand from hyper scaled AI data centers, electrification structures, and shipbuilding could increase domestic steel consumption by 2-4 million tons annually through 2030. This equates to a 1-3% CAGR for domestic steel. Similar to other raw materials China dominates global steel production with approximately 54% market share. Our research for “National Champions” identified U.S. Steel (since acquired by Nippon Steel), Nucor Corporation, Worthington Steel, and Arcelor Mittal.

One raw material input to make steel, depending on method used, is metallurgical coal. Metallurgical coal is primarily used in basic oxygen furnaces (BOF), while smaller quantities can be used in electric arc furnaces (EAF). Given cleaner energy regulations and goals domestically, the United States produces the majority of its coal (70%) by EAF process and the other (30%) by BOF. The opposite is the case in many other countries, like Japan (Nippon steel). Details of the Nippon Steel / U.S. Steel acquisition include a National security agreement which gives the standing Presidential administration authority to appoint a board member and a non-economic “golden share” giving veto power over certain production and staffing decisions. The deal also required Nippon to make significant investments in U.S. facilities.

Since our last newsletter, the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. The act contains a number of tax provisions that promote investment in domestic production of raw materials and manufacturing. One provision is an expansion on the list of 45X credits for critical minerals production to include “metallurgical coal” effective in 2026 tax year. If unfamiliar with this credit, it is generally 10% of production costs (excluding labor and overhead), although with metallurgical coal the credit is 2.5%.  In addition to metallurgical coal, the previously approved list of minerals eligible 45X credits at the 10% rate includes several natural resources familiar to newsletter readers – aluminum, cobalt, graphite, lithium, titanium, and, of course, a number of the rare earth elements.   For 45X production tax credit purposes, it doesn’t matter if the coal is used domestically or exported overseas. Given the tax credit and investment of Nippon Steel in US facilities (including basic oxygen furnaces), we thought Alpha Metallurgical Resources and SunCoke Energy were also contenders in the steel sector for taking advantage of the changing geopolitical landscape.

Another element providing some tailwinds to the domestic steel producers is the increases on Section 232 tariffs on steel and aluminum, up from 25%. (Section 232 Tariff Increase)

With regard to our next essential material copper, global demand is expected to increase at a CAGR of 2-3% through 2035. The executive order Section 232 investigation on critical minerals and derivative products put a recent spotlight on copper. President Trump has suggested on social media that the investigation will result in copper materials and products getting a similar 50% sectoral tariff starting in August. (EO: Section 232 Investigation) Its not a surprise that China does the majority of copper refining ~40% globally.  Freeport-McMoRan Inc. and Southern Copper Corporation are two companies we think worth paying attention to.

Lastly, global demand for cement is expected to increase at a CAGR of 4-5% through 2033. China leads global supply of cement with an approximate 51% market share. But the United States domestic production meets about 80-85% of domestic demand, leaving only 15-20% imported from other countries. Canada leads US cement imports with ~40%. A few domestic companies we are watching are Vulcan Materials Company and Martin Marietta Materials.

Nucor Corporation (Ticker: NUE)

• Location: HQ in Charlotte, North Carolina. Operates 300+ facilities across U.S., Canada, and Mexico. Major steel mills in Alabama, Indiana, and Texas.
• Focus: Leading steel producer specializing in carbon and alloy steel products and steel recycling.
• Use Case: Supplies steel for construction, automotive, energy and heavy equipment.
• Strategic Edge: Largest U.S. steel producer with a low-cost, vertically integrated model.
• Website

Worthington Steel (Ticker: WS)

• Location: HQ in Columbus, Ohio. Operates 30 facilities across U.S., Canada, and Mexico. Key processing plants in Ohio, Michigan, and Alabama.
• Focus: Processes and distributes flat-rolled steel products for automotive, construction and industrial applications.
• Use Case: Supplies steel for construction.
• Strategic Edge: Spun off from Worthington Industries in 2023, WS leverages a customer-centric, value-added processing model with just-in-time delivery.
• Website

ArcelorMittal (Ticker: MT)

• Location: HQ in Luxembourg City, Luxembourg. Major facilities in Europe, North America, Brazil, and Asia.
• Focus: World’s second largest steel producer, offering flat and long steel products and a smaller mining segment for iron ore and metallurgical coal.
• Use Case: Supplies steel for construction, automotive, and energy sectors.
• Strategic Edge: Global scale and diversified portfolio provide cost advantages and supply chain control.
• Website

Alpha Metallurgical Resources (Ticker: AMR)

• Location: HQ in Bristol, Tennessee. Operates 20+ metallurgical coal mines and preparation plants primarily in Virginia and West Virginia.
• Focus: Produces metallurgical coal for steelmaking, with minor thermal coal output.
• Use Case: Metallurgical coal is critical for coke production, used in BOF for steel.
• Strategic Edge: One of the largest U.S. metallurgical coal producers.
• Website

SunCoke Energy (Ticker: SXC)

• Location: HQ in Lisle, Illinois. Operates cokemaking facilities in Illinois, Indiana, Ohio, Virginia and Brazil, with logistics terminal in the U.S.
• Focus: Produces high quality coke for steelmaking and provides coal logistics services.
• Use Case: Coke is essential for steel production. Logistics services handle coal and other bulk materials for industrial clients.
• Strategic Edge: One of the largest U.S. coke producers with long term contracts ensuring stable revenue.
• Website

Freeport-McMoRan (Ticker: FCX)

• Location: HQ in Phoenix, Arizona. Operates several open pit copper mines in North America, two molybdenum mines in Colorado, and one mine in Indonesia.
• Focus: Leading international mining company specializing in copper, gold, and molybdenum. World’s largest publicly traded copper producer.
• Use Case: Supplies copper for electrical infrastructure, construction, and industrial applications.
• Strategic Edge: Operates long lived, geographically diverse assets with significant reserves.
• Website

Southern Copper Corporation (Ticker: SCCO)

• Location: HQ in Phoenix, Arizona. Operates primarily in Peru and Mexico with exploration projects in Chile, Argentina and Ecuador.
• Focus: One of the largest integrated copper producers, focusing on copper mining, smelting, and refining with by products like molybdenum, silver, and zinc.
• Use Case: Supplies copper for electrical applications, construction, and infrastructure.
• Strategic Edge: Industry leading low-cost production. Large copper reserves and expansion projects.
• Website

Vulcan Materials Company (Ticker: VMC)

• Location: HQ in Birmingham, Alabama. Operates 400+ facilities, including 240 aggregates quarries, 130 asphalt plants, and 70 concrete plants, across 22 U.S. States and Mexico.
• Focus: Largest U.S. producer of construction aggregates. With additional production of asphalt and ready-mix concrete.
• Use Case: Aggregates and concrete are critical for cement intensive construction
• Strategic Edge: Extensive U.S. quarry network provides proximity to high demand markets, reducing transport costs. Long-life reserves ensure supply stability.
• Website

Martin Marietta Materials (Ticker: MLM)

• Location: HQ in Raleigh, North Carolina. Operates 350+ facilities, including 200 aggregate quarries, 120 asphalt/concrete plants, across 28 U.S. states and the Bahamas.
• Focus: Major producer of construction aggregates with additional operations in asphalt, ready mix concrete and magnesia-based chemicals for industrial applications.
• Use Case: Supplies aggregates and concrete for cement heavy infrastructure.
• Strategic Edge: Diversified portfolio and strategic acquisitions expand market reach.
• Website

Example of National Champion Playbook

We believe recent corporate events with respect to rare earth producer MP Materials (MP) featured in our May article Strategic Materials in Focus – Rare Earth Elements and Lithium are instructive of this Administration’s National Champions strategy for domestic producers of strategic, critical, and essential materials.

• July 10, 2025 – MP Materials Announces Transformational Public-Private Partnership with the Department of Defense to Accelerate U.S. Rare Earth Magnet Independence
• July 15, 2025 – MP Materials and Apple Announce $500 Million Partnership to Produce Recycled Rare Earth Magnets in the United States
• July 16, 2025 – MP Materials Announces Commencement of Proposed $500 Million Public Offering of Common Stock
• July 17, 2025 – MP Materials Announces Pricing of Upsized $650 Million Public Offering
• MP Materials stock price rose 40% for the trading week ended July 18, 2025.

In addition to the Administration providing direct financing and facilitating additional financings from supply dependent corporate end users, we believe the Administration will also use tax and tariff policies to promote domestic production.   Tariff policies are mostly self-evident, but within the OBBBA there is a little know provision that encourages domestic production of natural resources, manufacturing, and other production activities.  The OBBA includes a Special Depreciation Allowance for Qualified Production Property.  Think of this as the Build Baby Build provision.

The act allows an additional first-year depreciation deduction equal to 100% of the adjusted basis of “qualified production property (QPP).” Under prior law, owners of nonresidential real property had to depreciate the cost of such property over a 39-year period. A “qualified production activity” is defined in the OBBBA as manufacturing, production (e.g. agricultural production and chemical production) or refining of a “qualified product” which is generally defined as tangible personal property.   Construction of QPP must begin between January 19, 2025, and January 1, 2029; and be placed in service before January 1, 2031.

Forge Ahead

This piece wraps up coverage of our rigorous work to develop an internal Strategic Materials Fund (basket of securities) to align with these perceived long-term structural trends of the U.S. strategic sourcing of raw materials.  We’re pleased to announce that we’ve named this client portfolio sleeve Forge Ahead. Forge Ahead is comprised of sixteen natural resource equities with position sizes ranging from 3% to 7.5% within the sleeve.  Client model allocations to the Forge Ahead basket roughly range from 3% to 7% depending on client risk tolerance with more risk tolerant accounts receiving a higher allocation.    Servant client portfolios were deployed to Forge Ahead this past week beginning on Monday with incremental deployment on Friday.

“I don’t believe in pessimism.

If something doesn’t come up the way you want, forge ahead.”

~ Clint Eastwood