US steel stocks
US steel stocks (XME) U.S. Steel Corporation (X) and AK Steel (AKS) are trading sharply higher today. Nucor (NUE) and Steel Dynamics (STLD) are also in the green. We saw a selling spree in US steel stocks yesterday as markets feared that China could also be exempt from the Section 232 steel tariffs.
However, as we noted yesterday, the sell-off looked overdone for two key reasons. Firstly, it’s still uncertain whether Section 232 tariffs on China will be waived. Secondly, any action on Chinese steel exports now hardly moves the needle for the US steel industry since Chinese steel exports account for a fraction of total US steel imports.
Nevertheless, since China’s domestic steel consumption has slowed down this year, the country’s steel exports have registered a monthly rise for three consecutive months. Chinese overcapacity still remains the key risk for the global steel industry. See China’s Export Juggernaut Rolls on despite Trump’s Tariffs for a detailed analysis of China’s April trade data.
Coming back to US steel stocks, we see that they seem to be enjoying a smart rally today despite flat broader markets. But this performance doesn’t necessarily mean that uncertainty over Section 232 exemptions has died down. President Trump still needs to negotiate quotas with the countries that are exempt from the Section 232 tariffs. However, some regions—especially the European Union and NAFTA seem to be playing hardball over the Section 232 quotas. See Will Europe Fall in Line with Trump’s Steel Quotas? for how the Section 232 exemptions could play out.