United States Steel Corporation’s (X) stock price dropped by -6.27 percent to $18.25 on Wednesday following announcement by the company to exercise call option to acquire remaining equity in Big River Steel for nearly $774 million. But restructuring of the industry and the anticipation of significant infrastructure projects from the administration of President-elect Joe Biden are the reasons for the rise in stock price in recent months.
In September 2020, United States Steel shares received a positive boost when it was revealed that ArcelorMittal USA had been acquired by competitor Cleveland-Cliffs. At the same time, the steel firm AK Steel was acquired by Cleveland-Cliffs in early 2020.
This is a stronger competitor at first glance and a negative consideration for United States Steel. But analysts see it in a different way because steel production is a strategic industry, and consolidation means that it may soon draw significant orders from the US government.
This is backed by President Joe Biden’s comment on proposals to create millions of jobs to develop a modern U.S. clean energy system. Contrary to common misconceptions, a positive factor for the ferrous industry is the growth of solar and wind power. In order to install panels, solar power plants need a large amount of metal structures, and wind farms need fittings, linkage rings, gearboxes, and other massive metal parts.
In addition, spending on roads, constructing new bridges, and so on could be increased by the new administration. This would be a source of revenue growth for United States Steel.
But it should be remembered that politicians’ comments are not a factor in selecting long-term investment guidelines. Former President Donald Trump has pledged $1 trillion or more in capital spending, but a federal investment program has never been launched.
United States Steel Corporation (X) stock is up 150% over the past three months and it has added about 60% since beginning of the year.