With the Trump administration taking office in 2025, his proposed import tariffs across the board have heightened concerns about inflation. Many stocks are feeling the impact of stockpiling ahead of new tariffs, while other stocks are falling due to the prospect of rising costs, leading to weaker demand and lower margins. The basic materials sector is bracing for a potential rise in steel prices. This would mean imposing a 60% tariff on US imports of Chinese-origin steel.
This may have minimal effect since China has a small share of the US steel import market. However, the goal is to attract more business to the nation’s steel producers. While this appears to be a boon for domestic steel producers, Trump’s “Made in America” stance could also cause further harm to one particular steel company. Here’s 1 steel stock to buy and 1 to sell under Trump’s tariffs.
US Steel: Nippon takeover bid likely to be rejected
US Steel Today
USA Steel
As of 3:58 pm ET
- 52 week range
- $26.92
▼
$48.85
- Dividend yield
- 0.61%
- P/E ratio
- 21.74
- Target price
- $41.32
Nippon Steel won the bidding war for USA Steel Co. New York Stock Exchange: X for $55 in cash, for a total of $14.9 billion and a 40% premium to the December 15, 2023 closing price. It beat out domestic manufacturer Cleveland Cliffs Inc. New York Stock Exchange: CLF. Nippon Steel has committed to protecting the jobs of current US Steel employees and investing an additional $2.7 billion in its operations. By April 2024, shareholders unanimously approved the deal.
However, the Committee on Foreign Investment in the United States (CFIUS) remained deadlocked on the deal until the December 23, 2025 deadline. This has given President Biden a 15-day window to make a decision. On January 3, 2025, Biden blocked the deal, citing national security concerns. Both Nippon and US Steel opposed the blockage and said they would continue to push for a deal. The companies said the policy distorted and predetermined the review process.
President Trump and the Steelworkers Union oppose the deal
If companies were expecting any sympathy or attention from the new President Trump, they were out of luck. Trump previously said he opposed the deal. The steelworkers union also opposed it. Steel company President David McCall called Nippon Steel a serial trade cheat, commenting: “Allowing it to buy US Steel would give it the opportunity to further destabilize our trading system from within and, in the process, jeopardize our ability to meet our own national needs. security and critical infrastructure needs.” Due to fundamental issues during a market downturn, investors may want to sell this stake.
United States Steel Co. Price Chart. (X) on Monday, January 6, 2025
Consequences of a blocked transaction
U.S. Steel not only wants the deal, it needs it to close for its future. US Steel has an outdated infrastructure based on expensive and inefficient blast furnace technology that also faces environmental challenges. It would use Nippon’s capital injection to modernize its businesses. The company has already warned that if it fails to secure a cash infusion from the deal, it will shift production from its aging blast furnaces to fuel-efficient, non-union electric arc furnaces and move its headquarters from Pittsburgh. US Steel is losing market share and facing rising costs due to its large unionized workforce.
Steel Dynamics: domestic winner with strong balance sheet
Steel Dynamics today
As of 4:00 pm ET
- 52 week range
- $104.60
▼
$155.56
- Dividend yield
- 1.55%
- P/E ratio
- 10.74
- Target price
- $141.13
Although 2024 has been a tough year for Fort Wayne, Indiana. Steel Dynamics Inc. NASDAQ: STLDthe company has a solid balance sheet with low debt levels, allowing it to weather the macro climate. President Trump’s protectionist policies should help grow the company’s business. However, forecasts were cut in December as prospects for a weaker global market in 2025 persisted. Finnish steelmaker Outokumpu has warned that the oversupplied European market is worsening as weak demand coupled with long site maintenance times will weigh on its earnings.
I’m setting the bar low now, but there’s light at the end of the tunnel.
On December 16, 2024, Steel Dynamics also lowered its guidance for the fourth quarter of 2024. The company expects fourth-quarter EPS to be between $1.26 and $1.30, versus the consensus estimate of $1.63. Earnings are expected to be significantly lower than in the third quarter due to a lower average selling price, seasonally lower shipments and unplanned outages in Butler’s flat coil division, which further reduced shipments by 50,000 tonnes. However, clients are positive about business prospects for 2025.
Steel Dynamics, Inc. Price Chart (STLD) on Monday, January 6, 2025
The order book is increasing through the first half of 2025 as interest rates decline and US infrastructure program support and adaptation are expected to have a positive impact on demand for steel beams, deck products, flat products and long steel. . The company expects volumes to increase in the second half of 2025 and has repurchased $250 million in shares. Bullish investors may view this stock as a value play.
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