Why Steel Stocks Have Risen This Week

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24.80
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MT
ArcelorMittal

Stocks of steel companies operating in the U.S. have risen sharply over the past few days amid strengthening expectations of the White House instituting more measures to tackle the issue of unfairly traded steel imports.

MT Stock Price June 2017

ArcelorMittal Stock Price, Source: Google Finance

X Stock Price June 2017

U.S. Steel Stock Price, Source: Google Finance

The Department of Commerce is expected to announce the results of its Section 232 investigation this week into whether foreign steel imports threaten U.S. national security. [1] The findings of the report can become the basis for taking greater action to restrict imports of the offending commodity.

In determining whether a commodity is critical to national security, the administration is expected to study the extent of its usage in industries such as defense, energy, and telecommunications. The previous Section 232 investigation covering iron ore and semi-finished steel products, undertaken under the Bush administration in 2001, determined that steel was not critical to national security partly because the defense sector accounted for only around 3% of domestic steel usage. [2] While the share of usage of steel in defense has not altered drastically, it remains to be seen whether the outcome is different this time around. Though the market is anticipating an outcome that is favorable to the steel industry, it is not a foregone conclusion as the White House will have to consider potential retaliatory trade-related action taken by foreign countries against American exports. However, given President Trump’s tough stance against unfairly traded steels, the week could end on a good note for the steel industry.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for ArcelorMittal

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Notes:
  1. Steel stocks rise on speculation Trump administration’s industry report will lead to China tariff, CNBC []
  2. Trump Faces Laugh Test as He Weighs ‘Nuclear Option’ for Steel, Bloomberg []