Oct 07 2026 01:12 AM EST

Policy Tailwinds Lift US Steel Theme Amid Mixed Macro Headwinds

USA STEEL’s five‑day gain of 8.0 % and three‑month advance of 13.3 % are being lifted by a mix of policy‑driven tailwinds and offset by several macro‑headwinds that have shown up in the earnings commentary of the theme’s top movers. Ternium S.A. continues to benefit from the USMCA’s rules‑of‑origin provision (70 % North‑American steel content for zero‑tariff autos) and posted a +35.6 % three‑month return.

Policy‑Driven Tailwinds

A “slowly rising price level but declining input cost” environment cited by multiple analysts also helped **Ternium** and **Gerdau S.A.** (the latter up +22.0 % over three months).

Infrastructure‑related demand – data‑center construction, on‑shoring/re‑shoring by manufacturers and non‑residential projects – is repeatedly highlighted as a tailwind for **Steel Dynamics, Inc.** (+5.2 % three‑month) and **Nucor Corporation** (+10.7 %).

Finally, the Section 232 tariff regime that raised duties on imported steel gave a “tariff tailwind” to **Cleveland‑Cliffs Inc.** (+27.9 % three‑month) and to domestic mills that can charge higher Midwest premiums, a factor noted in Reliance Steel & Aluminum’s Q1 2026 call.

Macro Headwinds

A polar‑vortex event in **January 2026** spiked natural‑gas and electricity prices across the Midwest, creating an “energy‑price and price‑realisation lag” headwind for Cleveland‑Cliffs (Q1 2026 EBITDA hit by an $80 m one‑time energy cost).

Rising raw‑material costs (scrap, ferrous inputs) pressed margins at **Nucor** and **Reliance Steel & Aluminum**, the latter citing LIFO‑expense headwinds tied to aluminium and carbon product costs.

Macro‑level pressures include **Fed‑policy tightening** (higher interest rates) and a **strengthening US dollar**, which weaken export competitiveness and raise financing costs – themes echoed in the outlooks for **ArcelorMittal S.A.** and **POSCO Holdings** (both flagged macro‑economic and labor‑related headwinds).

Geopolitical shocks – the **U.S.–Iran war** disrupting energy supply chains and the **Middle‑East conflict** lifting freight rates (BCI C3 up to $33.98/t) – have been called out as headwinds for **Ternium**, **Companhia Siderúrgica Nacional** (net unit revenues down to $49/t) and **POSCO**.

Recent Performance Snapshot

Over the last five days the USA STEEL theme rose 8.0%, with the strongest gains coming from Companhia Siderúrgica Nacional (21.6%), Gerdau S.A. (11.4%), Cleveland‑Cliffs Inc. (10.8%), Steel Dynamics Inc. (8.9%) and Ternium S.A. (8.5%).

This short‑term lift was driven by tariffs and elevated freight rates that have supported hot‑rolled coil (HRC) prices, a factor highlighted by UBS as providing near‑term strength for U.S. steel.

At the same time, headwinds have emerged: global oversupply is putting downward pressure on finished steel prices while raw‑material input costs remain stubbornly high, compressing margins across the sector.

Currency volatility in the Southern Cone—especially swings in the Argentine peso and shifting Mercosur trade policy—has added further pressure, and a high‑interest‑rate environment is weighing on free cash flow for capital‑intensive producers.

Specific stock moves illustrate these forces: Cleveland‑Cliffs fell ‑7.72% on September 28 2026 on worries about steel demand and pricing pressures; Gerdau slipped ‑3.24% on September 18 2026 after downgrades from Goldman Sachs, HSBC and Bank of America cited the impact of U.S. tariff relief on Canadian steel that erodes Gerdau’s North‑American pricing premium; Algoma Steel Group Inc. was rated Hold/Accumulate on October 6 2026 with a technical score of ‑0.12, reflecting a mixed outlook amid low liquidity and cautious sentiment; and U.S. Steel shares hit their lowest level since March 2016 in August 2026 after the last tranche of gains from President Trump’s protective tariffs unwound.

Looking at the three‑month horizon, the theme advanced 13.3 %. The top performers were Ternium S.A. (35.6%), Companhia Siderúrgica Nacional (33.3%), Cleveland‑Cliffs Inc. (27.9%), Gerdau S.A. (22.0%) and Algoma Steel Group Inc. (18.4%).

Ternium’s surge is tied to Mexico’s nearshoring boom, the Pesquera Phase 2 expansion that will add roughly 1.6 Mtpa of hot‑rolling capacity by 2026‑2027, and the USMCA rules‑of‑origin requirement that forces Mexican‑assembled vehicles to use 70 % North‑American steel, a structural tailwind for the company.

Companhia Siderúrgica Nacional benefited from strong Brazilian domestic demand and its pellet self‑sufficiency initiatives, which reduce exposure to Chinese import competition.

Cleveland‑Cliffs pointed to cost‑cutting initiatives, a potential POSCO partnership and improved steel fundamentals, though it also warned of a price war for secured volumes.

Gerdau’s gains were tempered by margin pressure from the U.S. decision to halve import tariffs on Canadian steel to 25 %, a move noted by Goldman Sachs, HSBC and Bank of America that caps earnings upside.

Algoma Steel highlighted its diversification into higher‑value processing and counter‑cyclical steel‑intensive end products, which kept its Pipe and Tube business profitable despite macro‑economic headwinds.

Other contributors included POSCO Holdings Inc. (13.6%) leveraging its technical leadership in advanced high‑strength steel coatings, Nucor Corporation (10.7%) benefitting from EAF flexibility and lower carbon intensity, Reliance Steel & Aluminum Co. (7.9%) as a service‑center play, Commercial Metals Company (6.4%), Steel Dynamics Inc. (5.2%) and ArcelorMittal S.A. (3.6%), the latter lagging due to slower progress on its green‑steel transition amid decarbonization pressures.

Headwinds over the quarter included Chinese steel export surges—approximately 110 Mt in 2024, keeping HRC prices $100‑150/ton below Mexican domestic prices—ongoing BF/BOF decarbonization pressure, a cyclically soft steel pricing environment, persistently high input costs, elevated interest rates, and currency fluctuations affecting the MXN/USD and ARS/USD pairs.

U.S. Steel’s own results reflected these dynamics: FY2025 revenue fell 11.56% to $15.61 billion, a price‑driven decline, while its Q3 2025 sales were $4.432 billion.

The stock’s on‑balance volume (OBV) reached a seven‑year high, providing a bullish tailwind that could support an eventual breakout, and analyses noted the stock was at a cusp of a historic breakout with a potential three‑wave correction toward the $25‑$28 range, though some forecasts warned the shares could drop another 40 % if macro‑economic pressures persist.

Fundamental Outlook

The trailing twelve‑month operating margin for the USA STEEL theme improved to 7.7 % in 2026