Back to top

No Respite for U.S. Steel Makers as Imports Rise 21% YTD

Read MoreHide Full Article

U.S. steel imports show no signs of abating, notwithstanding a string of punitive trade actions (in the form of heavy tariffs) in the recent past. Steel imports have shot up roughly 21% year to date – according to a recent report from the American Iron and Steel Institute (AISI), an association of North American steel makers.

Per AISI, based on preliminary U.S. Census Bureau data, total U.S. steel imports went up 20.6% year over year to roughly 26.6 million net tons through the first eight months of 2017. Finished steel imports for the same period also increased 15.5% to around 20.4 million net tons. Year to date, finished steel import market share is estimated at 28%, which is higher than 26% clocked in full-year 2016.

Major finished steel products that have showed a significant year-to-date increase in imports on a year-over-year basis include oil country goods (up 250%), standard pipe (up 47%), line pipe (up 42%), sheets and strip all other metallic coatings (up 33%), mechanical tubing (up 32%), cold rolled sheets (up 31%), sheets & strip hot dipped galvanized (up 25%) and hot rolled bars (up 19%).

The biggest offshore suppliers for the eight-month period were South Korea with 2,620,000 net tons (down 3% year over year), Turkey with 1,827,000 net tons (up 8%), Japan with 1,065,000 net tons (down 17%), Taiwan with 906,000 net tons (up 39%) and Germany with 849,000 net tons (up 2%).

Imports - Still a Pressing Problem

U.S. steel producers including Nucor Corp. (NUE - Free Report) , United States Steel Corp. (X - Free Report) , AK Steel Holding Corp. (AKS - Free Report) , Steel Dynamics, Inc. (STLD - Free Report) and Commercial Metals Co. (CMC - Free Report) are still struggling to defend their turf from a tide of low-priced steel imports from foreign manufacturers.

Despite a raft of stringent trade actions and threats of further future measures, imports continue to make inroads into the American market due to foreign producers’ overcapacity.

While positive rulings in trade cases (resulting in levy of heavy tariffs) against China last year led to a decline in Chinese steel exports to the United States, imports from other countries remain at above historical levels.

Domestic steel producers, during their second-quarter earnings call, raised concerns about a renewed flood of subsidized imports this year.

Moreover, Nucor recently lowered its earnings guidance for the third quarter citing continued import pressure that has not allowed steel pricing to keep pace with higher raw material costs during the quarter. Steel Dynamics also provided lower-than-expected third-quarter earnings guidance recently, saying that high levels of steel imports have put pressure on domestic steel prices.  

Nucor currently carries a Zacks Rank #5 (Strong Sell) while Steel Dynamics is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Much Hopes Pinned on Section 232

Domestic steel makers are pinning their hopes on President Trump enforcing new restrictions on imported steel. Steel stocks got a big lift in April 2017 after the Trump administration ordered an investigation under Section 232 of the Trade Expansion Act of 1962. The Section 232 probe is aimed at determining whether the imports pose a threat to national security and also gives the President the power to impose broad tariffs or quotas on imported steel.

Executives of U.S. steel and steel-related firms, in a letter, urged President Trump last month to impose immediate restrictions on imports. The appeal came after a delay in the release of the report on the Section 232 probe by the U.S. Department of Commerce, which was initially expected at the end of June 2017.

While the findings from the Section 232 steel investigation are due, it goes without saying that a favorable outcome from the probe will provide a major boost to domestic steel makers.

Should the findings under the investigation come positive, the Trump administration will get the opportunity to take broad-based trade actions against cheap imports. This would provide a significant thrust to steel prices and give American steel producers more pricing power.    

Can Hackers Put Money INTO Your Portfolio?

Earlier this month, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.

Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.

Download the new report now>>



More from Zacks Analyst Blog

You May Like