Washington Just Handed Steelmakers a Huge Win: ETFs to Gain

Core Viewpoint - The recent proclamation by U.S. President Donald Trump provides a two-year reprieve for coke oven facilities from stringent EPA rules, which is expected to stimulate growth in the U.S. steel supply chain and improve earnings for steel producers and coke-exposed miners [1][2]. Industry Impact - The easing of compliance pressure on metallurgical coke producers and related iron ore assets is anticipated to act as a significant growth catalyst for the U.S. steel supply chain [2]. - The proclamation is likely to reduce regulatory-driven shutdown risks for U.S. integrated steelmakers and metallurgical coke producers, providing a clearer investment landscape for ETFs focused on these sectors [3]. Trade and Tariff Context - The U.S. remains heavily reliant on steel imports, with nearly 25% of its steel supply coming from abroad, primarily from Mexico, Canada, and key allies in Asia and Europe [4]. - A 25% tariff on steel imports was previously imposed to bolster domestic production, but this has led to trade conflicts, particularly with China, resulting in a significant reduction in Chinese steel exports to the U.S. [5]. - Recent data indicates a 16.8% month-over-month decline in U.S. steel imports as of August 2025, attributed to the doubling of the Section 232 tariff from 25% to 50% [6]. Domestic Production and Costs - Trade tensions and tariffs have increased input costs for U.S. manufacturers, with domestic steel prices nearly double the global benchmark, putting pressure on downstream margins [7]. - The latest proclamation suggests that the U.S. administration is prioritizing industrial output stability, treating coke ovens and related facilities as national security infrastructure [8]. ETF Opportunities - The current environment is expected to enhance pricing power and volume predictability for companies in the steel and metallurgical coal sectors, benefiting ETFs that include U.S. steel producers and coke-linked mining companies [10]. - Notable ETFs include: - State Street SPDR S&P Metals & Mining ETF (XME): AUM of $2.56 billion, up 38.6% year to date, with top holdings including Nucor Corp and Steel Dynamics [11][12][13]. - VanEck Steel ETF (SLX): Net assets of $125.6 million, up 38.4% year to date, with major holdings in iron ore suppliers [14]. - iShares U.S. Basic Materials ETF (IYM): Net assets of $125.6 million, up 15.8% year to date, featuring significant investments in Nucor and Steel Dynamics [15].