‘Nothing but positive’: This Canadian steel company is giving Trump’s tariffs the thumbs up
Russel Metals Inc. says U.S. tariffs on steel imports are “nothing but positive” for Canada’s only publicly traded steel distributor and processor. Investors aren’t quite buying it.
“The impact for us can be nothing but positive because higher steel prices are good for us,” Chief Financial Officer Marion Britton said in a phone interview, adding that Mississauga, Ontario-based Russel has operations in both Canada and the U.S. and does very little cross-border trade. “We are not impacted like a Canadian steel mill because we don’t ship anything to the U.S.,” she said.
Still, Russel shares fell for an eighth straight day Friday, losing as much as 2.7 per cent to $29.23, the lowest since December. The decline came amid broader market jitters after U.S. President Donald Trump announced he plans to slap tariffs of 25 per cent on steel and 10 per cent on aluminum imports and tweeted Friday that “trade wars are good, and easy to win.”
Russel shares are down about 8.5 per cent since reaching a recent high in mid-February. The company, which distributes steel as well as processes it into products according to their customer’s specifications, derives about 30 per cent of its revenues from the U.S., according to data compiled by Bloomberg.
Frederic Bastien, analyst at Raymond James Financial Inc., said further volatility in steel prices has positive implications for Russel.
“If given the choice, wouldn’t you rather earn 20 per cent gross margin on US$1,000 per ton than on US$800 per ton? So would RUS management,” Bastien wrote in a note, reiterating his outperform rating on the stock.
Other Canadian companies and industries are forecasting higher costs that will likely be passed onto customers:
The key will be finding out if Canada and others are exempt from the tariffs as it’s not clear if the U.S. has adequate capacity to meet its domestic needs for steel and aluminum, said Linamar Corp. Chief Executive Officer Linda Hasenfratz.
It will take “quite some time” to turn that capacity on if it doesn’t exist and would have a significant impact on many industries as those costs will be passed on to consumers and negatively impact demand, she said.
Steel and aluminum are key inputs for the frame and components of the buses that New Flyer Industries builds, said David White, executive vice president of supply management for the Winnipeg, Manitoba-based company, the largest transit bus manufacturer in North America.
While the company primarily builds its buses and coaches with U.S. steel and aluminum, tariffs at that level would raise overall prices regardless of their origin and potentially impact the North American supply chain and the outcome of NAFTA, he said.
Earlier trade spats over softwood lumber ended up pushing more shipments to Canada’s Pacific Coast port and exports to China and other Asian markets surged, said Robin Silvester, chief executive officer of the Vancouver Fraser Port Authority.
There’s a possibility the ”thickening of the border” could result in increased trade with Asia again, he said. The port handles nearly a quarter of Canada’s non-U.S. trade.
The tariffs would likely hurt Canada’s oil and gas industry, which relies on metals for pipelines and much of its equipment, said Dinara Millington, vice president of research at the Canadian Energy Research Institute.
“It would be an increase in costs — that would be the direct impact,” she said. “Your prices are going to be higher for the goods and products you’re purchasing.”
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