Tariff Talk Spills Into Steel Sector

Updated to include further commentary

NEW YORK (TheStreet) -- Brewing speculation about a possible U.S.-China trade war appeared to move into the steel sector Monday.

On his blog on RealMoney Silver, Doug Kass wrote, "Listen for talk of the Chinese imposing steel tariffs."

The heightening of concerns over a potential trade war follows President Obama's statement on Friday that the U.S. government would impose as much as a 35% tariff on Chinese tire imports.

Officials in China responded in kind by saying they would levy tariffs on U.S. chicken and automotive products.

Also Monday, reports emerged that global steel prices are in decline, according to numbers from the research group World Steel Dynamics, after a period of increased production on the back of stimulus packages, especially in China. Weakening prices may indicate that production boosts have outpaced demand.

In a note to clients, Dahlman Rose metals analyst Anthony Rizzuto wrote that most of that decline has come from Chinese steel, while U.S. prices have "trended higher."

"We remain concerned that the resilient domestic price, which is being met with increased resistance from buyers, may draw imports to the U.S. market, which may push domestic prices lower," Rizzuto said in the note.

Shares of big U.S. steelmakers were higher across the board, if slightly. U.S. Steel(X Quote) closed Monday's session at $46.80, up 94 cents, or 2%, while Nucor(NUE Quote) stock ended at $46.78, up 41 cents, or 0.88%.

ArcelorMittal's(MT Quote) American depositary receipts gained 60 cents, or 1.5%, to $40.27; Steel Dynamics(STLD Quote) added 20 cents, or 1.2%, to $17.34; Worthington Industries(WOR Quote) rose 29 cents, or 2%, to $14.78; and AK Steel advanced 32 cents, or 1.5%, to $21.87.

Still, volumes were below average in most steel names, noted Mike Bellafiore, a trader and partner at SMB Capital, "leading us to believe that there wasn't a ton of new money flowing into these stocks today."

-- Written by Scott Eden in New York

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