Steel Stocks Rally on Trump's Tariff Move

By Karen Langley 

Shares of steel companies rose Monday after President Trump said he would restore tariffs on steel and aluminum imports from Brazil and Argentina.

U.S. Steel Corp. gained 3.4%, AK Steel Holding Corp. surged 5.3% and TimkenSteel Corp. rose 4.3%, despite declines in the broader stock market. Trade uncertainties and a disappointing report on the manufacturing sector weighed on major indexes. The S&P 500 fell 0.7%; its materials sector fell 0.6% and the industrials sector slumped 0.7%.

"We view the reinstatement of tariffs on Argentina and Brazil as a marginal supply-side positive for finished-steel producers," such as AK Steel, Commercial Metals Co., Nucor Corp., Steel Dynamics Inc., TimkenSteel and U.S. Steel, Cowen & Co. metals and mining research analyst Tyler Kenyon wrote in a note Monday.

Commercial Metals, Steel Dynamics and Nucor edged up less than 2%.

Imports from Argentina and Brazil accounted for less than 4% of total U.S. imports of finished steel from 2014 through 2018, a figure that has also held true year to date, Mr. Kenyon wrote.

For companies that rely on imports of semifinished steel, however, the reimposed tariffs would raise production costs. Brazil accounts for about half of U.S. imports of steel slab, according to the research note. Companies with operations rerolling steel slab in the U.S. include ArcelorMittal and California Steel Industries, it said.

"More costly slab from Brazil could lift the overall sheet + plate cost curve in the U.S. leading to a cost of production disadvantage vs. the rest of world," Mr. Kenyon wrote.

ArcelorMittal's American depositary receipts fell 1.5%; California Steel is owned by Vale SA and Japan's JFE Holdings.

Mr. Trump made the unexpected announcement about the tariffs early Monday on Twitter, saying that Brazil and Argentina had been devaluing their currencies.

The steel and aluminum tariffs were imposed globally in 2018, before the trade war with China. Argentina and Brazil had made deals with the Trump administration to exempt their exports from the tariffs.

Write to Karen Langley at [e-mail]

(END) Dow Jones Newswires

December 02, 2019 14:36 ET (19:36 GMT)

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