Delay on Tariffs Boosts Canadian Steel Stocks

On April 30 U.S. President Donald Trump announced that he would grant Canada and Mexico a “final” one-month break from steel and aluminum tariffs. The delay paves the way for further progress to be made on NAFTA, which has been inching close to a deal in recent weeks. The Trump administration is reportedly eagre to reach a new agreement with the stock market faltering and the crucial November midterms fast approaching.

Canadian steel stocks responded well to the good news.

Stelco Holdings Inc. (TSX:STLC) climbed 0.93% on May 2. Shares have now increased 3.9% in 2018 so far. The Hamilton-based steel company stock has entered into a period of volatility since the tariffs were initially announced in March. This was unfortunate timing especially after impressive fourth quarter and full-year results for 2017. Revenue increased 23% to $1.60 billion in 2017 and adjusted EBITDA soared 145% to $799 million.

Tree Island Steel Ltd. (TSX:TSL) stock rose 0.75% on May 2. Shares of the Vancouver-based producer and supplier of steel wire and products have climbed 1.1% in 2018. The company is set to post earnings when the market closes today. In 2017 revenues increased 1.5% to $234.7 million and gross profit and EBTIDA dropped to $18.2 million and $7 million, respectively. The stock does offer a solid dividend of $0.08 per share representing a 2.9% dividend yield.

The extra rope granted by the Trump administration will undoubtedly be used by the three sides to attempt to close a NAFTA deal in May. It appears very unlikely that Canada and Mexico will be forced to absorb the brunt of steel and aluminum tariffs.