Analyst: These U.S. steel companies are making a comeback
From Nick Rokke, Analyst, Palm Beach Daily:
Steel is critical to both our economy and our military. This is not an area where we can afford to become dependent on foreign countries.
—President Donald Trump
MIDDLETOWN, OHIO—Right now, I’m traveling through the Rust Belt to see how President Trump’s “America First” platform is working for people.
I want to know if his policies are helping the economy… or crippling it.
So far, what I’ve seen suggests the economy is strengthening.
Jobs are coming back and people aren’t worried about losing the ones they have. This is a very different picture than the one painted by the mainstream media. They like to promote doom and gloom. Those kinds of stories are better for ratings.
At the Daily, we don’t care about ratings. We care about making you richer every day. So we’re going to report what’s actually going on… and how it affects your investments.
My latest stop was in Middletown, Ohio. It’s home to one of the biggest steel mills in the country. And it’s poised to benefit from one of President Trump’s favorite weapons: tariffs.
On April 21, Trump made the statement above during a meeting with steel company executives at the White House. The president pledged to crack down on the Chinese practice of dumping its cheap surplus steel into the United States.
The U.S. steel industry was already on the rebound before Trump took office. But I think it will go much higher if the president gets his way. In a moment, I’ll show you a few companies that will benefit from this policy.
Middletown looks like its best days were back in the 1970s… when U.S. steel was king.
I bounced along the main drag (Roosevelt Blvd.) wondering when it was last paved. Weeds grew in sidewalk cracks, and the buildings looked tired. It’s a city in need of some TLC.
The fine dining establishments here consist of the Lone Star Steakhouse, Olive Garden, and Applebee’s.
But most steel towns are a little run-down. The industry has been in decline for years.
According to fact-checking website PolitiFact, there were five times more steel workers in the 1980s than there are today.
But Middletown is better off than some other steel towns.
For example, the population of Gary, Indiana, has been halved since the 1980s. All because the U.S. stopped making as much steel.
You see, making steel is very labor-intensive. It’s cheaper to bring in steel from low-cost countries like China than to produce it here. And that’s been devastating for these kinds of towns.
I came to Middletown to visit AK Steel’s mammoth plant.
The company employs about 3,000 people in a town of 48,000. The steel plant sits on 2,791 acres. That’s 4.4 square miles of steel-producing capacity.
If the AK Steel plant ever closed, Middletown would be devastated.
A Rebounding Industry
Today, U.S. steel plants are under attack by government-subsidized steel from China.
China is making way more steel than it needs. And for years, China has been dumping its cheap steel on the U.S. market.
U.S. steel production declined 20% in the past 10 years alone. But it started to rebound in 2016.
That’s because the U.S. got serious about putting a stop to this. That’s when we put a 450% tariff on corrosion-resistant steel imported from China, along with smaller tariffs on that same type of steel imported from Italy, India, South Korea, and Taiwan.
After that happened, stocks of companies like AK Steel went on an epic run.
AK Steel (AKS) went from $2 at the beginning of 2016 to over $11 by the start of 2017. Nucor (NUE) doubled. Steel Dynamics (STLD) nearly tripled.
Right now, all these companies have pulled back a little from their highs.
But they are poised to go higher as long as the U.S. protects this industry. The U.S. needs steel, and it looks like more of it will come from U.S. steel companies.
Look for these steel companies to thrive in an “America First” environment.
It looks like more tariffs are coming to the industry. And when that happens, we could see a repeat performance of 2016 for these companies.
Nick Rokke, CFA
Crux note: The rebounding economy is part of a long-term bull market in stocks. My colleague Teeka Tiwari says the last time we saw a bull market like this, investors had the chance to make extraordinary gains like 1,933%… 3,636%… and 3,954%. Click here to learn more (plus as a bonus, you’ll learn how to get the Elite 25 portfolio, which contains 25 cheap, high-quality companies that will thrive in the America First environment.)