Wells Fargo Says Canada's Steel Retaliation `Irrelevant'

• Steel prices are at elevated levels ($1,200 for Hot Rolled Coil) due to past tariffs and demand, but further upside is limited, and sustaining these prices is challenging.
• Canada's retaliatory tariffs on US steel are considered 'irrelevant' as Canadian prices have already risen, and countries are becoming less dependent on each other.
• Nucor and Steel Dynamics are preferred steel stocks due to their resilience during price retreats and upcoming free cash flow inflection as capex rolls off.
• Aluminum market is more muted, but higher energy prices (electricity is 30% of cost) are expected to keep aluminum prices stronger for longer, offering better value in aluminum stocks.

Wells Fargo analyst Timna Tanners expresses caution on the outlook for steel prices, noting that current high prices are difficult to sustain due to import attraction and increasing domestic capacity. She views Canada's retaliatory tariffs as largely symbolic. For aluminum, she sees a more tentative market but expects stronger prices longer-term due to energy costs, and finds aluminum stocks offer better value than steel.