Steelmakers Nucor and Steel Dynamics have pulled back to key support levels with first-quarter earnings and revenue reports due next week. Meanwhile, President Joe Biden is pushing for increased tariffs on China-made steel and aluminum to be tripled.
Biden on Wednesday told U.S. steelworkers he wanted to up tariffs on China because "Chinese steel companies produce a lot more steel than China needs, it ends up dumping extra steel on the global markets."
China is the world's largest steel maker, with its companies producing 12% more than last year than the U.S. China's production was flat for the year, but because it produced more than it needed, exports swelled 36%. Imports, meanwhile, dropped 28%, according to China's National Bureau of Statistics.
President Biden also said on Wednesday said U.S. Steel will remain an "iconic American company," signaling opposition to the proposed $14.9 billion takeover by Japan-based Nippon Steel. On April 12, U.S. steel reported that 98% of its shareholders voted to approve the transaction.
Meanwhile, media reports circulated Wednesday that the U.S. is considering increasing the existing 7.5% average tariff rate on Chinese steel and aluminum. The Biden administration is also reportedly working with Mexico to prohibit China from evading tariffs by exporting steel to the U.S. via Mexico.
Chinese steel and aluminum represent a small portion of U.S. imports at 2.2% and 3.6%, respectively in 2023, according to the International Trade Administration.
Morgan Stanley analyst Carlos De Albea wrote Wednesday the impact of the higher tariffs is "likely to be limited."
"We expect shares of U.S. aluminum producers to react positively to the news, more so than those of local steelmakers, because of their higher sensitivity to metal prices," De Albea wrote.
Steel Stocks Find Support Ahead Of Earnings
Biden's pledges to support U.S. steelworkers and steel companies comes as Nucor, the largest U.S. steel company, and Steel Dynamics report first-quarter earnings and revenue next week. Meanwhile U.S. Steel holds its annual shareholder meeting on April 30.
Nucor stock dropped 0.3% in early stock market action Thursday. Steel Dynamics edged down 0.6%. Nucor is up 4.5%, Steel Dynamics has a 16.9% gain so far this year.
Both stocks are consolidating gains after breakouts, pulled back to their 50-day moving averages ahead of earnings reports.
Analysts expect Nucor EPS to fall around 18% to $3.67 with revenue declining 5% to $8.26 billion. Nucor forecasts earnings between $3.55-$3.65 per share in Q1.
Meanwhile, Wall Street forecasts Steel Dynamics Q1 earnings dropping 12% to $3.51 per share on sales totaling $4.74 billion, down 3% compared to Q1 2023. Nucor reports late Monday with STLD announcing Q1 earnings Tuesday.
Among other steel stocks, U.S. Steel edged up 0.7% while Cleveland-Cliffs gained 0.6% early.
Steel prices are also moving higher with hot roiled coil (HRC) steel futures around $850 per ton, up about $50 per ton from last summer. However, this is well below prices from 2021 when U.S. steel prices skyrocketed to all-time highs, moving above $1,900 per ton.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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