In May 2024, the Biden administration announced plans to leave the tariffs imposed on Chinese steel during the Trump administration in place. In fact, the administration also sought to triple the tariffs to 25%.  

But you know the saying about the best-laid plans? Any economic benefits to tariffs for U.S. companies require playing a long game in a world where the time between election cycles (and policy changes) is breathtakingly short.  

However, there was some evidence that the tariffs imposed on Chinese steel achieved the desired effect of reopening some steel mills. But other data shows that domestic steel producers were hurt by retaliatory tariffs. Tariffs are a complicated, and often oversimplified topic. 

As it stands today, the increased tariffs never materialized. Could they resurface after this election cycle? Possibly. Steel stocks are among the worst-performing basic materials stocks as revenue and earnings retreat on a year-over-year basis. 

But this is more than just a case of being willing to buy the dip. Lower interest rates may facilitate increased steel demand. For these and other reasons, here are three steel stocks that may be ones to watch heading into 2025.  

Clarity Is Helping Boost U.S. Steel Stock 

In the last five days, shares of U.S. Steel Corp. (NYSE: X) are up 10.75% after the news that U.S. regulators are blocking Nippon Steel’s proposed acquisition of the company. It’s fair to ask why. Through the first two quarters of 2024, the company’s revenue and earnings reflect the cyclical slump in steel.

But one reason to believe the steel industry may be ready to break higher comes from the continuous demand for data centers. Steel has multiple applications in data centers. And the industry could get another catalyst if lower interest rates break the electric vehicle (EV) industry out of its doldrums. 

The blocking of the Nippon deal may be a case of election year politics. But investors will have to wait until after the election to see if Nippon bows out or makes another bid for the company.  

Either way, U.S. Steel appears to be undervalued. Earnings are expected to increase by 23% in the next 12 months and analysts have a consensus price target that gives the stock more than 14% upside.  

Cleveland-Cliffs Still Has an Acquisition Itch to Scratch 

Cleveland-Cliffs Inc. (NYSE: CLF) made headlines earlier this year after making an unsolicited bid to buy U.S. Steel for $8.3 billion. On the surface, the move looked like a solid compromise to prevent the sale of U.S. Steel to a foreign nation. However, automakers objected to the move, citing concerns that the combined companies would control 65% to 90% of the steel used in that sector.  

The story may not be over. U.S. Steel has informed the Biden administration it will have to shut down several mills if the Nippon Steel deal is blocked. This has spurred Cleveland-Cliffs to announce it has the ability to buy those integrated steel mills. If it can’t buy the company, it may be able to pick up some key parts.  

CLF stock also appears to be undervalued. It’s currently down 45.4% in 2024. But analysts are forecasting earnings growth of over 3,000% as the price of steel is projected to move higher on increased demand.  

Steel Dynamics Presents a More Stable Alternative 

If you’re buying U.S. Steel or Cleveland-Cliffs, it’s because you believe the cyclical slump in steel is coming to an end. But what if the economy is headed into a recession? In that case, you may want to consider Steel Dynamics Inc. (NASDAQ: STLD).  

What makes the third largest steel producer in the U.S. attractive is its commitment to sustainability (i.e. recycling). This allows quality metals to stay in circulation, which helps the company’s profit margin. In this sense, the business has a defensive quality to it. It may not be your best bet in a booming steel market, but it can mitigate risk during a contraction. 

This dynamic is playing out in analysts’ forecasts. Earnings growth is expected to decline by about 2% in the next 12 months. However, analysts maintain a Hold rating on STLD stock with a price target of $143.43 which would be an increase of 30% from the stock’s closing price on September 12, 2024.