After more than three years of underperformance in the market, United States Steel Corp. (ticker: X) and the rest of the domestic steel industry is getting some bullish commentary from Wall Street.
The steel industry could also be getting some major support from President Donald Trump, who recently launched an investigation into steel imports.
In April, Trump instructed Commerce Secretary Wilbur Ross to decide if Trump could implement Section 232 of the Trade Expansion Act of 1962 to restrict steel imports. The president would have the authority granted by Section 232 should the Commerce Department find evidence that steel imports are a threat to national security.
Although metals imports have never before been deemed enough of a threat for Section 232 implementation, proponents of its use argue that U.S. reliance on foreign steel puts the nation at risk of not being able to supply enough domestic steel to the military in the event of a war.
The Commerce Department has 270 days to complete its investigation, but it has already missed a self-imposed deadline of the end of June. If the Ross report suggests enough of a threat that Trump restricts steel imports, domestic steel prices and companies like U.S. Steel, AK Steel Holding Corp. (AKS) and Nucor Corp. (NUE) could get a major shot in the arm.
On Thursday, Longbow Research analyst Chris Olin included “a positive Section 232 remedy announced by the Trump administration” among several positive catalysts ahead for U.S. Steel. “The news flow is turning positive for the domestic steel industry and X,” Olin says in the report.
Longbow isn’t the only firm betting bullish on U.S. Steel. Earlier this week, Citi Research analyst Alexander Hacking said U.S. Steel is well-positioned to outperform its peers now that the company has cleared seasonal weakness and a number of one-time costs that weighed on earnings in the first quarter. However, he says investors should be careful making any Section 232 assumptions.
“Section 232 could generate…
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