Will Trump’s Tariff Agreement Help or Hurt Big Steel?

Steel stocks are seeing some nice action of late – but this might be just the beginning.

Insiders at U.S. Steel (NYSE: X) and Cleveland-Cliffs (NYSE: CLF) are buying shares in their own companies.

This follows public announcements by U.S. Steel that it’s raising its dividend and restarting a tubular steel plant that’s been dormant for years. The company credits moves by the Trump administration for the change in its fortunes.

The border wall with Mexico could be another reason that steel companies are looking up. The “concrete” wall Trump is fighting for will now have steel slats. And thanks to recent funding efforts, sections of it might get built!

However, even all of that won’t be enough to light a fire under the steel sector. There must be more to start the flames.

And tariffs could be that spark.

Tariffs have been helping Cleveland-Cliffs. The company’s outspoken CEO is a big fan of tariffs and has specifically credited them for the improved environment in the industry.

Natural disasters are also helping steel companies. A recent dam collapse in Brazil has damaged the prospects for iron ore giant Vale (NYSE: VALE) and could increase iron ore prices in 2019. Cleveland-Cliffs is a major producer of iron ore pellets.

Analysts are falling over each other to upgrade the sector and the shares.

Three major steel producers – U.S. Steel, Cleveland-Cliffs and steel giant Nucor (NYSE: NUE) – are all reporting their customers are doing well and demand should be strong in the first quarter and throughout 2019

If that becomes reality, then the rising tide will lift all boats, especially for the poor performer of 2018, U.S. Steel.

ACTION PLAN: Monitor prices for Cleveland-Cliffs and Nucor. Each needs a small move to threaten 52-week highs. If those moves happen, U.S. Steel could be in for a strong run higher.


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