Bush Adds Strength to Steel Stocks

His imposition of tariffs on selected imports will boost prices and profits for the U.S. industry

By Leo Larkin

Standard & Poor's is keeping its positive view of most steel stocks in the wake of the Bush Administration's Mar. 5 decision to impose tariffs on selected imported steel products under section 201 of the 1974 Trade Act. Share prices of domestic steel companies rose on the news.

The new tariffs will lift prices that end users pay for steel products, leading to higher industry profits. For integrated steelmakers, the Administration's decision not to grant legacy cost relief -- for pensions and retiree health-care costs -- will lead to more facility shutdowns, removing additional production capacity from the market. The ruling's biggest beneficiary: minimill Nucor (NUE ), which carries Standard & Poor's highest investment ranking, 5 STARS, or buy, (see BW Online, 2/25/02, "Nucor: This Minimill Could Be a Giant").

As for other domestic players, S&P has a 4 STAR (accumulate) ranking on each of Commercial Metals (CMC ), Quanex (NX ), Steel Dynamics (STLD ), U.S. Steel (X ), and Worthington Industries (WOR ). AK Steel (AKS ) is ranked 3 STARS (hold).

Larkin is an equity analyst covering the steel industry for Standard & Poor's

Before it's here, it's on the Bloomberg Terminal.