Nucor Tops JPMorgan's Metals List, Eyes 67% Surge Thanks To Tariffs

Following President Trump's announcement of 50% steel tariffs in late May, JPMorgan has named Nucor (NUE) its top pick in the sector, citing a potential 67% upside driven by product diversification and stronger positions in plate and rebar. While the broader steel sector remains cautious due to potential tariff exemptions for USMCA partners, Nucor's higher utilization rates and favorable positioning in key product segments are expected to drive outperformance, particularly if tariffs remain in place and restocking occurs later in the year.

Analysis

The recent announcement of 50% tariffs on imported steel has catalyzed a significant re-rating within the sector, with JPMorgan Chase & Co. designating Nucor Corp. (NUE) as its top pick, citing a substantial 67% potential upside. This bullish outlook on Nucor is attributed to its strategic product diversification, particularly its lower exposure to underperforming value-add sheet, and a stronger market position in plate and rebar, where prices are exhibiting greater resilience and are anticipated to provide incremental upside heading into 2026. Despite Nucor's stock appreciating 10% since the tariff implementation—thereby outperforming peers such as Cleveland-Cliffs Inc. (CLF), Steel Dynamics Inc. (STLD), and Commercial Metals Co. (CMC)—the broader steel market exhibits caution, primarily due to the lingering possibility of tariff exemptions for USMCA partners. JPMorgan does not foresee a summer rally in steel prices but anticipates a firming price floor, bolstered by easing scrap costs and rising mill utilization. Nucor is projected to outperform, especially if hot-rolled coil prices stabilize around $925/ton and rebar near $900/ton. Furthermore, Nucor's Q1 utilization rate of 80% presents more significant upside potential compared to U.S. Steel Corp's X Flat-Rolled division at 65%, and offers room for growth even when compared to Steel Dynamics' 89%. This situation creates a bifurcated outlook for steel investors: near-term apprehension versus Nucor's pronounced long-term potential, which is contingent upon the tariffs remaining in effect and a restocking cycle commencing later in the year. The very positive sentiment for NUE (0.8) contrasts with neutral or negative sentiment for peers, reinforcing its favored position.

Key Decisions for Investors

• Investors should consider Nucor (NUE) as a potentially strong performer within the steel sector, given its favorable product mix, significant utilization upside, and positive analyst outlook, particularly if the announced tariffs persist.
• Closely monitor developments concerning potential tariff exemptions for USMCA countries (Canada and Mexico), as such exemptions could materially impact the sector's current tariff-driven momentum and Nucor's projected outperformance.
• While Nucor presents a compelling case for long-term investment based on current tariff structures and restocking expectations, maintain a cautious stance towards the broader steel sector in the near term due to underlying uncertainties and potential price volatility.