Steel stocks have been in focus this week as President Joe Biden has shifted focus to the industry. On April 17, the White House announced plans to enact further tariffs on Chinese-imported steel.
In a move intended to safeguard domestic steel and shipbuilding interests from Chinese competitors, Biden is planning to triple the tariffs levied against steel and aluminum imported from China. He recently traveled to Pittsburgh and spoke at the United Steelworkers headquarters, laying out his plans for spurring growth for U.S. steel producers. Biden also vowed to ensure that Japan’s Nippon Steel is not able to acquire United States Steel (NYSE:X).
The White House issued the following statement on the necessity of Biden’s proposed steel tariffs:
“Chinese policies and subsidies for their domestic steel and aluminum industries means high-quality U.S. products are undercut by artificially low-priced Chinese alternatives produced with higher emissions. To the extent consistent with the United States Trade Representative’s (USTR) review of Section 301 tariffs and findings of her investigation, President Biden is calling for USTR to consider enhancing the effectiveness of tariffs on Chinese steel and aluminum products by tripling them.”
This type of economic measure has the potential to significantly strengthen the U.S. steel and aluminum industry. As Axios reports, it won’t happen overnight. However, Biden is making clear what he sees as the best course of action to safeguard one of the American industries that has suffered as Chinese competition has intensified.
As Pennsylvania is a key swing state, it is likely that Biden will prioritize protecting the jobs of its workers. But this focus will likely benefit the entire industry, creating positive momentum for steel stocks.
The Best Steel Stocks to Buy
U.S. Steel: Biden’s stance against Nippon Steel’s acquisition of this pillar of American industry may have sent shares down for U.S. Steel. But any time there is positive momentum for steel stocks, X will be among the winners. The company has demonstrated impressive growth over the past six months, demonstrating a clear resilience in a volatile market. “If the deal falls through based on government meddling,” speculates InvestorPlace contributor Jeremy Flint, “it’ll prove US Steel is essential to national stability – making it a top steel stock to hold for the long run.”
Alcoa (NYSE:AA): This aluminum producer will likely have a clear advantage if Biden’s tariffs are implemented. Carlos De Albea, an analyst at Morgan Stanley, recently noted that the Wall Street firms expects to see domestic aluminum companies benefit more than their steelmaking peers as their sensitivity to metal prices is higher. If that proves to be true, Alcoa will be in an excellent position to continue growing, after gaining nearly 50% over the past six months. This is likely why AA stock rose on the news of Biden’s proposed tariffs.
Steel Dynamics (NASDAQ:STLD): Any list of steel stocks to buy should also include this U.S. Steel rival. The company is based in Fort Wayne, Indiana, and shares are up 40% over the past six months. While commodity stocks are sometimes seen as risky, Steel Dynamics has successfully combined industry-leading manufacturing with sustainability, showing everyone what the future of the industry may look like. As Flint reports:
“As America’s third-largest steel producer, Steel Dynamics distinguishes itself not just through its scale but also via its commitment to sustainable manufacturing. The company’s emphasis on metal recycling not only bolsters its profitability by ensuring high-quality metals remain in circulation within global value chains but also supports wider environmental objectives.”
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
