NEW YORK: US steel stocks rallied on Thursday as US President Donald Trump began a probe into whether imports of foreign-made steel are a US national security risk.
US Commerce Secretary Wilbur Ross said the investigation is in response to Chinese exports of steel into the United States reaching the point where they now have 26 percent of the market.
Trump signed a directive asking for a speedy probe under section 232 of the Trade Expansion Act of 1962 at a White House meeting that included executives of several US steel companies. The law allows the president to impose restrictions on imports for reasons of national security.
The S&P 1500 steel index shot up about 5 percent, sharply adding to gains after the midday signing of the executive order. The index was last up 4 percent, on track for its biggest daily gain since Feb. 9.
Steel shares had rallied after the Nov. 8 US election amid optimism over increased infrastructure spending under Trump, but the steel index has been drifting lower since February. Investors in recent months have begun to question how soon Trump's pro-growth policies may be implemented.
Shares of Steel Dynamics, which reported results late Wednesday, were up 4.5 percent, while Nucor, which reported early Thursday, was up 3.6 percent.
Shares of AK Steel shot up 7.5 percent while shares of US Steel were up 7 percent.
"For too long, China and other nations have been conducting economic warfare against the American steel industry by subsidizing their steel industries, distorting global markets, and dumping excess steel into the United States," US Steel said in a statement, adding it has offered its cooperation with the investigation.
The last time the US statute was used was to restrict imported oil, while former President George W. Bush attempted to slap tariffs on steel imports in 2002 under a different means, according to a research note from Height Securities.
"Making the case that steel imports threaten national security may be a... high legal hurdle, although we suspect the Trump administration will argue the potential loss of domestic steel manufacturing capacity could hinder the ability to respond to urgent defense needs," the Height note said.
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