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How Trump’s Infrastructure Plan Can Affect U.S. Steel

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Post-election steel rally

Steel stocks saw a sharp rally after Donald Trump won the US presidential election in November 2016. The reaction by steel stocks weren’t surprising given Trump’s stance on curbing imports and boosting US manufacturing.

Infrastructure investments

Reviving America’s infrastructure and the steel industry were among Trump’s primary campaign promises. Trump vowed to spend $1 trillion over a decade to boost US infrastructure, which is expected to boost US steel demand.

Nucor (NUE), the leading US-based steel producer, expects Trump’s proposed trillion-dollar infrastructure investment plan to generate annual incremental demand of 5 million tons of steel over the next ten years. This figure implies an incremental annual increase of ~5% in US steel demand.

Next on the agenda

According to a senior White House official, Trump expects to pursue his agenda by announcing his proposal in as the new year opens. While it could still be some time before we have the blueprint for Trump’s infrastructure plans, we could see efforts in that direction next year.

US steel producers such as U.S. Steel (X) and AK Steel (AKS) could benefit from higher infrastructure spending. Higher infrastructure spending coupled with a possible action against imports under the Section 232 investigation could boost US steel stocks in 2018.

If we see favorable action on both fronts next year, it could lead to higher capacity utilization rates in the US steel industry. This trend could help build momentum in US steel prices (CLF) (CMC).

In the final article in this series, we’ll see how various steel companies could gain from infrastructure spending.

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