Nucor and steel stocks surge on Trump tariff plan

The finest steel has to go through the hottest fire, as the saying goes, and the latest round of tariffs is really cranking up the heat.

On May 30 President Donald Trump fired yet another salvo in his trade war when he said that he’d double tariffs on steel imports to 50%.

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“We are going to be imposing a 25% increase. We’re going to bring it from 25% to 50% the tariffs on steel into the United States of America, which will even further secure the steel industry in the United States,” he said during a visit to a U.S. Steel mill in the Pittsburgh suburbs.

Shares of U.S. Steel  (X)  and other U.S. companies in the sector, including Nucor  (NUE) , Cleveland-Cliffs  (CLF)  and Steel Dynamics  (STLD) , surged following the announcement.

Copper prices also leaped as traders bet that Trump would impose hefty duties on the metal, which is used in power and construction.

Tariffs to hinder steel demand: analyst 

However, shares of the Big Three automakers — Ford  (F) , General Motors  (GM)  and Stellantis  (STLA)  — tumbled on the news. Overseas steelmakers also took a beating.

The U.S. is the world’s largest steel importer, excluding the European Union, with a total of 26.2 million tons of steel imported in 2024, according to the U.S. Department of Commerce.

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“Higher prices are also likely to weigh further on U.S. steel demand from the manufacturing sector, which we already expect to contract this year,” analyst Eoin Dinsmore at Goldman Sachs told Reuters.

Germany’s second-biggest steelmaker, Salzgitter, warned that Washington’s tariff policy was dealing a severe blow to European industry.

The U.S. accounted for around a fifth of European steel exports outside of the EU, according to Germany’s steel association.

“The risk for the European market, as well as other regional markets, is that some of the trade flow could reroute,” said Bastian Synagowitz at Deutsche Bank.

Some analysts were skeptical whether the full force of the tariffs as announced would come into play.

“I think the final result will be far lower than initially projected, especially concerning its duration,” said Chelsea Ye, senior analyst at metals research firm McCloskey.

BMO: Nucor strategy is promising

Meanwhile, BMO Capital upgraded Nucor to outperform from market perform with a price target of $145, up from $140, according to The Fly.

Nucor is executing on a multiyear organic-growth plan that should over time support higher profitability and free cash flow, the firm said.

Related: Tesla analysts raise red flag about rivalry, consumer interest in key market

BMO Capital said the company remained well positioned to benefit from the announced doubling of steel tariffs due to its relatively lower utilization rates and diversified product mix.

The shares are trading at a “compelling” valuation, the firm added. Yahoo Finance pegs the stock’s forward price-to-earnings multiple at 14.2.

Trump touted what he called a blockbuster merger agreement between U.S. Steel and Japan’s Nippon Steel that he said would keep the iconic U.S. steelmaker in Pittsburgh. He had previously opposed such a merger.

Veteran trader: Cleveland-Cliffs may be ripe

Nippon Steel will invest more than $14 billion in U.S. Steel over 14 months and operate the U.S. company as a separate entity, even as it becomes a wholly owned subsidiary.

TheStreet Pro’s Stephen Guilfoyle said Trump also orchestrated a so-called golden share for the U.S. government, according to which it will have approval over a number of board seats at the company.

“Obviously, if these newly increased tariffs hold, and that is certainly a big ‘if’ in this environment with this administration, it could and probably would mean increased business for U.S.-based steel producers,” he said in his recent column.

Guilfoyle, whose career dates back to the floor of the New York Stock Exchange in the 1980s, said the government had described the situation as a matter of national security, “so one would think that at least a significant portion of this increase could stick.”

“That would be much to the chagrin of both Asian and European steel exporters,” the veteran trader said. “The EU has already complained and threatened countermeasures.”

Shares of steelmakers fell in South Korea, which was the fourth-biggest exporter of steel to the U.S. last year, behind Canada, Mexico and Brazil, according to American Iron and Steel Institute data.

Related: Economy This Week: Jobs report will show whether tariffs are hitting economy

Guilfoyle said that Cleveland-Cliffs, “despite some gnarly looking earnings and five consecutive quarters of year-over-year contractions in revenue generation, with its low potential point of entry often grabs the attention of traders and investors.”

Cleveland-Cliffs stock is down about 25% since January and down 66% for the year through May 30. At last check CLF shares had leaped more than 20% in Monday trading.

During the company’s first-quarter earnings call last month, CEO Lourenco Goncalves told analysts “our first-quarter results were unacceptable with worse-than-expected Ebitda and cash flow, mostly due to underperforming noncore assets.”

He said that the tariffs Trump executed in March were “the most relevant and necessary action to eliminate unfairly priced competition.

“The entire domestic industry, Cleveland-Cliffs included, continues to suffer and we’re starting to see a more consistent business environment and improved pricing in April and May.” he said.

Guilfoyle said that the company’s operating cash flow had been negative for three successive quarters and negative over the trailing 12 months as of March.

“The firm has shown negative net income for five of the past six quarters on a GAAP basis and has an overwhelming debt load relative to cash on hand,” he added. 

“That said, the technicals, which have been in decline, may just be ripe for a trade on the long side.”

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