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This Is Why Steel Stocks Are Popping Today

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Workers in a steel factoryPhotograph by Buena Vista Images Getty Images

Domestic steel manufacturers have taken a beating in the past few years, especially after the market was flooded by cheaper foreign imports—but now the sector is rallying.

On Tuesday, the U.S. Department of Commerce levied a hefty preliminary tariff of 266% on Chinese cold-rolled steel, saying that importers had unfairly lowered prices to gain market share with the help of government subsidies. The department also placed tariffs ranging from 2% to 71% on six other nations.

Following the news, United States Steel’s (X) stock surged nearly 18%, AK Steel Holding (AKS) jumped 19% while ArcelorMittal (MT) gained 10% during midday trade Wednesday. Steel Dynamics (STLD) also popped 4%.

The tariffs come as a much-needed relief for the industry, whose returns have been in the negatives. The Market Vectors Steel ETF, which tracks a basket of steelmakers, showed losses of 45% in 2015. The index is up 6% Wednesday.

“We think the duties came in above expectations and see this as a near-term positive for pricing,” wrote Anthony Rizzuto, an analyst at Cowen and Co. in a Wednesday note first cited by Bloomberg.

 

The tariffs, along with the stabilizing energy sector from the rising price of oil, could be great news for steelmakers in 2016.

The steel industry still has other headwinds to contend with, including a rising U.S. dollar, which has hurt domestic companies’ ability to compete on the global stage, as well as flailing demand in China, which accounted for close to half of world consumption in 2014.

The Dow Jones U.S. Iron and Steel Index is also up by 4%, while the NYSE Arca Steel Index is up roughly 6%.