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The VanEck Steel ETF and State Street Materials Select Sector SPDR swung sharply last week as U.S.-Canada tariff tensions escalated
Steel and aluminum stocks surged and then retreated last week as the escalating trade war between the United States and Canada sent investors scrambling to reprice exposure to North American metals supply chains.
SLX gained 1.6% on Monday, Aug. 25, following the breakdown of U.S.-Canada trade talks, and the State Street $STT Materials Select Sector SPDR (XLB) reached a new intraday record that session, topping the peak it had set in February. Shares of Nucor, Steel Dynamics, Cleveland-Cliffs, and Century Aluminum all climbed. The gains proved short-lived, however: by Friday's close, XLB had slipped into the red for the week and SLX was essentially unchanged, according to CNBC. Through Aug. 28, Morningstar data show SLX has gained more than 28% on the year and XLB more than 18%.
The swing reflects the complexity of a trade war between two countries whose metals industries are deeply intertwined. Dan Luttner, who serves as managing partner of the supply chain consulting firm NEOS by Argon & Company, characterized the initial stock move to CNBC as a repricing reflex rather than a durable signal. "The stock pop is a headline reflex, honestly — mills reprice to replacement cost the second a 50% wall goes up, so of course Nucor and Cleveland-Cliffs jumped," Luttner said. "But that's not the interesting question. The interesting question is who controls their feedstock inside the wall versus who's still exposed to it?"
