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Why U.S. Steel Stock Rose 8% in June

By Rich Smith – Updated Jul 5, 2017 at 7:54AM

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Hope (for trade protectionism) springs eternal.

What happened

Shares of U.S. Steel (X -2.82%) gained 8% in the month of June.

So what

Why is U.S. Steel's stock rocking? For the most part, the answer boils down to hopes for trade protectionism.

As banker Credit Suisse explained back in May, the Trump administration is currently conducting a "national security investigation" under Section 232 of the Trade Expansion Act of 1962 into whether foreign-made steel is being dumped on the U.S. If it finds that foreign companies are abusing the U.S. market, the Trump administration could impose tariffs on and limit imports of foreign-made steel.

This would both raise the cost and limit the availability of imported steel, thus making it easier U.S. steel manufacturers to raise their own prices -- and put steel prices back on an upward trend.

Last month, Deutsche Bank added its own bull thesis for U.S. Steel, arguing that the company "will benefit from... robust steel pricing and [a] turnaround in its Tubular business on improving Oil & Gas drilling activity."

Steel foundry

Image source: Getty Images.

Now what

At one point, Commerce Secretary Wilbur Ross said he was hopeful the Section 232 investigation would wrap up as early as the end of June, giving quick relief to U.S. steelmakers such as U.S. Steel. That proved not to be the case, and by law, the investigation could last as long as nine months from its start date in April -- meaning steelmakers might have to wait as long as February 2018 for their hoped-for remedies.

The longer it takes to happen, the greater the chance that steel prices, which gained in strength through the second half of June, will begin to fall again.

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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X
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