Domestic steelmakers are getting a boost from President-elect Donald Trump's as the infrastructure policies he has promised to implement should vastly change the landscape of the industry.
The 70-year-old billionaire businessman has promised to "create thousands of new jobs in construction, steel manufacturing and other sectors" to build the infrastructure needed to "enable new economic development in the U.S., all of which will generate new tax revenues." Trump also plans to "put American steel made by American workers into the backbone of America's infrastructure."
Given Trump's proposed policies, a number of steelmakers are being upgraded, such as United States Steel (X) , AK. Steel (AKS) , and Cliffs Natural Resources (CLF) , as Morgan Stanley equity analysts see meaningful undersupply for the first time since global financial crisis.
"For the first time in a decade, we see a credible long-term investment case for steel equities," wrote the Morgan Stanley analyst team in a research note Monday. "While specificity and details are still scare, we believe Trump's plans for infrastructure spending and trade protection ... should benefit the U.S. steel industry by both adding to demand and curbing import supply," they continued.
The firm upgraded X and AKS to Overweight from Equal Weight and increased CLF to Equal Weight from Underweight. Shares of X and AKS were up by as much as 8% and 9%, while CLF shares were also gaining during the trading session Monday.
Trump has proposed a $550 billion stimulus plan for infrastructure, which the Morgan Stanley analyst team lead by Evan Kurtz believes will increase steel demand by 20% annually, or approximately 22 million tons, for 5 years. Furthermore, the analysts think steel trade protection will likely increase, meaning higher premiums for U.S. steel over global pricing.