US steel companies
President Trump is scheduled to deliver a speech tonight about the Mexican border wall. President Trump tweeted that the Mexican border wall could be a “Steel Barrier rather than concrete.” According to Platts, citing the American Iron and Steel Institute, the steel barrier could require ~3 million short tons of steel. We should remember that the figure represents close to 3% of the annual US steel demand.
US steel companies have looked strong in 2019. Steel stocks had a dismal 2018 despite companies like Nucor (NUE) posting record earnings. Other US steel companies like U.S. Steel Corporation (X) and AK Steel (AKS) benefited from higher steel prices in 2018. Cleveland-Cliffs (CLF), which supplies iron ore to US steel companies, also benefits from strong steel prices (DIA).
US steel stocks rose after President Trump’s election in 2016. He vowed to protect US manufacturing from the onslaught of imports. President Trump talked about massive infrastructure investments during his campaign. From steel companies’ perspective, President Trump has already imposed tariffs on imported steel. However, infrastructure investments haven’t materialized.
US steel companies crave President Trump’s wall and bridges to boost US steel demand. The housing and automotive sectors are both leading steel end users. The sectors have shown signs of moderating growth. Steel prices have also been weak globally. US steel companies might require President Trump’s support in the form of tariffs and infrastructure investments. While the tariffs are already in place, markets fear that they might get watered down as the Trump Administration signs new trade deals.
Steel stocks might surprise on the upside in 2019. Read Why Metals and Mining Stocks Have Been a Falling Knife for a closer look at steel’s 2019 outlook.