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Why U.S. Steel Shares Jumped 10% Today

By Howard Smith - Dec 1, 2020 at 1:54PM

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Shares of the steelmaker have more than doubled in the last two months.

What happened

Shares of steelmaker United States Steel ( X 1.06% ) are 6% higher today, as of 1:15 p.m. EST, after a 10% jump earlier in the day. The stock has been on a remarkable run since the beginning of October, with shares more than doubling. 

X Chart

X data by YCharts

So what 

The recent run began after rival Cleveland-Cliffs ( CLF 2.34% ) made a surprising acquisition at the end of September, announcing it acquired ArcelorMittal USA, the U.S. assets of global steelmaker ArcelorMittal ( MT 2.21% ).

molten steel being poured from a ladle

Image source: Getty Images.

The acquisition added to industry consolidation that Cleveland-Cliffs began when it bought AK Steel earlier in 2020. 

Now what

Consolidation in the industry will likely benefit U.S. Steel and other domestic steelmakers. But investors are also sensing that the Biden administration may contribute to a resurgence in the steel market from ramped up spending on infrastructure repair. 

President-elect Joe Biden has said he plans to add "millions of construction, skilled trades, and engineering workers to build a new American infrastructure and clean energy economy."

A boon in renewable energy may sound like it would be unsympathetic to the steel industry. But any infrastructure project will need a huge volume of steel supply. Solar panel fields and wind farms specifically require steel sheet, plate, and connectors. 

If the new administration increases spending to upgrade highways, roads, and bridges, and also spurs the construction of renewable energy projects, the domestic steel industry will be a big winner. 

Investors are catching on to that, and the stocks of suppliers like U.S. Steel are getting renewed interest as those projects come closer to fruition. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

United States Steel Corporation Stock Quote
United States Steel Corporation
$22.81 (1.06%) $0.24
ArcelorMittal Stock Quote
$28.20 (2.21%) $0.61
Cliffs Natural Resources Inc. Stock Quote
Cliffs Natural Resources Inc.
$20.59 (2.34%) $0.47

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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