Steel Stocks Hammered After Tariffs
After a wild ride in recent weeks, markets finally settled up on news of the final tariff plan out yesterday: As expected, steel imports will face a 25% tariff, and aluminum 10%, although Canada and Mexico will be excluded for now.
So that’s good news for steel stocks right? You wouldn’t know to look at the market today, as U.S. Steel (X), AK Steel Holding (AKS), Nucor (NUE), and Steel Dynamics (STLD) are all falling Friday. The shares took a hit yesterday too, and even their initial rally last week didn’t last long.
Nonetheless, the tariffs are expected to support higher steel prices. Cowen & Co.’s Novid Rassouli writes that he sees upside for the entire steel group, given that the stocks are trading at a discount to current spot-steel prices.
He likes the fact that the tariffs exempt Canada and Mexico, as he believes this means there will be less disruption and panic from U.S. buyers, “enabling the changes to likely be digested more easily by the market.” He argues that steel shares will benefit as steel prices move higher, although Steel Dynamics is his preferred stock of the group–he has Market Perform ratings on U.S. Steel and AK Steel.
As for aluminum, he sees Century Aluminum (CENX) as the biggest beneficiary.
AK Steel is off 2.3% to $5.32 this morning, while U.S. Steel is falling 2.3% to $43.33, Steel Dynamics is down 0.7% to $45.65, Nucor is losing 0.6% to $67.23, and Century Aluminum is down 1.2% to $19.42. The SPDR S&P Metals & Mining ETF (XME) is off 0.3% to $36.79.