Steelmakers may benefit from Trump trade salvos, but Wall Street warns of longer-term headwinds
2 min read
Bundles of steel from Nucor Corporation sit for sale at Thompson Building Materials in Lomita, California, on Aug. 30, 2012.
Patrick Fallon | Bloomberg | Getty Images
U.S. steelmakers should be beneficiaries of President Donald Trump‘s new tariffs, but Wall Street warned that there are some risks in the longer term.
On Saturday, Trump slapped 25% tariffs on imports from Mexico and Canada and a 10% levy on those from China. On Monday, the U.S. agreed to pause tariffs on Mexico for one month in return for President Claudia Sheinbaum sending troops to northern border.
Those decisions reversed the stock market’s early slide. The Dow Jones Industrial Average was recently lower by about 100 points after buckling 600 points as the trading day began.
Steel stocks waffled, after seeing some gains in the premarket. Nucor shares were up about 2% and U.S. Steel moved 1% higher in morning trading, while Steel Dynamics was lower.
Nucor shares over the past year.
The levies are expected to make foreign steel more expensive in the United States. Companies hope U.S. production will rise as a result, and give them an opportunity to raise prices.
The industry has been battling cheap foreign imports for years, thanks to illegal dumping into the U.S. market, Nucor CEO Leon Topalian said in an interview with CNBC’s “Mad Money” last Tuesday. Dumping refers to when a foreign country exports products at a lower price than in its home market or below production costs.
“It’s the illegal dumping, the subsidization of steels and the currency manipulation that creates a very unbalanced and unlevel playing field that has hurt the steel industry for decades,” Topalian told Jim Cramer.
U.S. Steel
The planned acquisition of U.S. Steel by Japan’s Nippon Steel was blocked by the Biden administration in January. Nucor is now partnering with Cleveland-Cliffs in a potential bid for U.S. Steel, sources recently told CNBC’s David Faber.
Meanwhile, UBS also sees higher steel prices if the tariffs are imposed and kept.
“Trade disruption should drive prices higher in the near term and support U.S. steel equities, but low demand and capacity additions will offset these gains in major products in the medium term in our view,” analyst Andrew Jones wrote in a note Monday.
Bank of America Securities also highlighted future headwinds, despite the benefit the steelmakers will see from more expensive imports.
“Longer term, we see downside risk to the US steel stocks from the potential for materially reduced auto production, around 25% of U.S. steel demand,” analyst Lawson Winder wrote in a note Monday.
