For Immediate Release

Chicago, IL – October 2, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Commercial Metals Company CMC, L.B. Foster Company FSTR, Schnitzer Steel Industries, Inc. SCHN, POSCO PKX and ArcelorMittal MT.

Here are highlights from Thursday’s Analyst Blog:

5 Red-Hot Steel Stocks Set to Run Higher in Q4

The steel industry has staged a recovery after being out of favor for much of the first half, thanks to a revival in demand in key end-markets from the coronavirus-induced slowdown and a rebound in steel prices.

With China (the top consumer of steel) seeing an economic rebound and businesses gradually resume across the world following loosening of lockdowns and restrictions, things are looking up for the steel industry for the balance of the year. Recovery across major end-use industries such as construction and automotive represents a tailwind for the steel industry.

Moreover, steel prices have gained strength on an upswing in demand. However, the resurgence of coronavirus infections in Europe and rising cases in the United States may play a spoilsport.

Steel Demand Takes an Upturn on Economic Recovery

Demand for steel has picked up with the resumption of operations across major steel-consuming sectors, following the easing of restrictions globally. The automotive industry has gotten back into gear following pandemic-led shutdowns on the back of a strong recovery in customer demand. Notably, major U.S. automakers are ramping up production to boost lean vehicle inventories at dealerships in the wake of surging demand. The automotive rebound is driving demand for flat steel products globally.

Moreover, the resumption of many projects, which were stalled earlier due to labor shortages

Pacific Gas & Electric Co. transformers and power lines stand in Nevada City, California, June 12, 2019.



Photo:

David Paul Morris/Bloomberg News

Donald Trump promises to “keep America great” in a second term. But he won’t do it if his trade policies get in the way of a sorely needed upgrade of the U.S. electrical grid.

Investment in electricity for the 21st century will be a heavy lift for utilities. But it will become heavier if a Commerce Department investigation finds imports of transformers and related components to be a national-security threat and imposes tariffs. The price for the transformers required to modernize the grid is in the range of $8 billion—today. Deliberately raising that cost sounds insane. But then this is an election year.

In 2018 the Trump Administration used Section 232 of the Trade Expansion Act to declare imported steel a security threat and impose a 25% tariff. We warned the tariff wouldn’t make American steel producers more efficient but would hurt other industries. This is what happened in the transformer industry.

Transformers use a special electrical steel that in the U.S. is made by one company,

Cleveland-Cliffs

’ subsidiary AK Steel. Because U.S.-made “grain-oriented electrical steel” prices are high relative to the world market, many American transformer producers, prior to the 2018 steel tariffs, imported some of the raw material they need. The 25% steel tariff raised prices in the U.S. further, forcing many companies to move component manufacturing out of the country.

Without proof of unfair trade practices, national security is again the excuse of protectionists. Yet the steel in transformers comes from allies including Canada, South Korea, Japan and Brazil. Much of transformer and component production now comes from Canada or Mexico. Unless we’re expecting a sneak attack, the case for a national-security risk is

Cleveland-Cliffs Inc. has agreed to pay $1.4 billion in stock and cash for ArcelorMittal USA’s 19 steel and iron-mining facilities, including plants in Conshohocken and Coatesville, in a deal that puts much of the U.S. steel industry back under U.S. control.



a factory with smoke coming out of a train: Water hitting hot rolled steel causes steam to rise at ArcelorMittal Conshohocken.


© FILE/The Philadelphia Inquirer/TNS
Water hitting hot rolled steel causes steam to rise at ArcelorMittal Conshohocken.

The sale will turn U.S. steel mills collected since 2005 by London-based billionaire Lakshmi Mittal and his European companies over to Ohio-based Cleveland-Cliffs. With other newly-acquired operations, that makes Cleveland-Cliffs North America’s largest maker of the flat-rolled steel used in vehicles, buildings and appliances, with 25,000 employees, $17 billion in yearly sales, and a large debt.

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“Our success will not come from lower prices. It will come from quality, the ability to deliver on time,” and the use of “green” technologies such as substituting cleaner-burning natural gas from the coke fuel made from smoky coal, said CEO Lourenco Goncalves an energetic immigrant who has been compared to radical Tesla founder Elon Musk.

This deal to return so many steel mills to U.S. ownership comes just a day before the first Trump-Biden presidential debate is scheduled for the buyer’s hometown of Cleveland, after a campaign in which the candidates have argued the causes and cures of the long-term decline of U.S. steelmaking and other heavy industries, said J. Chris Rooney, president of Vanness Co., a Jacksonsonville, Fl. financial consulting firm.

He said ArcelorMittal, which owns foreign as well as U.S. mills, failed to take broad advantage of Trump administration steel import restrictions. For example, instead of producing more high-quality vehicle steel, ArcelorMittal mills in Pennsylvania continued producing lower-quality, lower-value cheap steel for rebar and other basic construction uses.

That had forced U.S. trade representative Peter Navarro to reverse the administration’s protectionist policy

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