Are US Steel Companies Preparing Themselves for Trump’s Wall?



US steel companies

Today, Nucor (NUE), the largest US-based steel producer, announced a $1.4 billion investment to construct a new steel plate mill in the US Midwest. Yesterday, President Donald Trump tweeted that the Mexican border wall could be a “Steel Barrier rather than concrete.”

The president has highlighted the investments made by steel companies at various forums. He also congratulated Steel Dynamics when the company announced a massive steel plant in November, and he visited U.S. Steel Corporation’s (X) Granite City facility last year after the company announced the restarting of a blast furnace it had idled in 2015.

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US steel companies (SPY) have been quite bullish in their outlooks. Trump’s Section 232 tariffs have helped lift US steel prices. Although US steel prices fell sharply in the second half of 2018, tracking global weakness, the spreads between US and international prices are still quite tempting.

As US steel companies’ earnings and cash flows have improved, they’ve been looking at ways to allocate capital. Companies (AKS) such as Cleveland-Cliffs (CLF) have announced buybacks. If President Trump manages to get his way on his proposed steel barrier on Mexico’s border, it will support US steel demand. Furthermore, if the president goes ahead with his infrastructure plans, it could provide another boost to US steel companies. Both Nucor and Steel Dynamics are investing significantly in new capacity.

US steel stocks are looking strong so far this year after a dismal 2018. Read Why Metals and Mining Stocks Have Been a Falling Knife for a closer look at steel’s 2019 outlook.


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