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U.S. Steel Imports Shoot Up in January, Drop Y/Y on Tariffs
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U.S. steel imports dropped year over year in January, but shot up on a monthly comparison basis – according to the latest report from the American Iron and Steel Institute (“AISI”), an association of North American steel makers.
According to the AISI, total and finished domestic steel imports are down 9.9% and 33.4% year over year, respectively, in January to roughly 3.14 million net tons and 1.63 million net tons, respectively.
However, total and finished domestic steel imports surged 97.7% and 20.4%, respectively, from December 2019. The AISI noted that these figures are based on preliminary Census Bureau data.
Finished steel import market share was 17% for the reported month. For December, finished steel import market share was estimated at 15%.
The surge in import on a monthly comparison basis was partly due to a significant spike in imports from Brazil.
President Trump, in early December 2019, announced that he is restoring tariffs on steel and aluminum imports from Brazil and Argentina. Trump accused these countries of devaluing their currencies which hurt American farmers. The White House had exempted these two countries from the tariffs in 2018 as they continued to negotiate over trade terms. However, the Trump administration later in December backtracked on its decision to reimpose tariffs on Brazilian imports. Brazil is a major exporter of steel to the United States. Tariffs on Argentine steel was also not being enforced.
Per the AISI, the biggest offshore suppliers for January were South Korea with 182,000 net tons (up 8% from December), Brazil with 88,000 net tons (up 579%), Japan with 76,000 net tons (up 14%), Spain with 55,000 net tons (up 79%), and Turkey with 51,000 net tons (up 606%).
Section 232 Tariffs Drive Y/Y Fall in Imports
Notwithstanding the sequential rise in January, imports for the month were still down year-over-year largely reflecting the impact of the 25% tariff on steel imports which the Trump administration had levied in 2018 under Section 232 of the Trade Expansion Act of 1962.
The Trump administration, in March 2018, imposed steep tariffs on steel and aluminum imports, defying a wave of criticism and threats of counter-measures from major foreign trade partners. The tariffs, which have made imports more expensive, are approaching the end of their second year.
The tariffs are aimed at rescuing the domestic steel and aluminum industries which had long been reeling under the onslaught of cheap imports and has suffered significant reduction in production and employment. They are, in particular, targeted at countries with which the United States has significant trade deficits.
While the tariffs on steel imports badly hit certain major industries including automotive that are key consumers of steel, they provided the long-struggling U.S. steel industry a much-needed shot in the arm. The tariffs boosted production capacity of U.S. steel producers amid lower imports. They have helped U.S. steel industry capacity break above the important 80% level – the minimum rate required for sustained profitability of the industry.
U.S. steel imports fell roughly 15% in 2019 as a result of the tariffs despite complete exemptions of Canada and Mexico, two major sources of steel imports to the United States. The United States, in May 2019, reached a deal to lift steel and aluminum tariffs from Canada and Mexico. These major trade partners have long been pushing the Trump administration to repeal the tariffs. The deal paved the road for the ratification the new United States-Mexico-Canada Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA).
Coronavirus Dampens U.S. Steel Industry’s Recovery
The U.S. steel industry bore the brunt of a sharp decline in domestic steel prices in 2019. A slump in steel prices and lower demand for the commodity amid the global slowdown hurt bottom lines of U.S. steel companies through the first three quarters of 2019. However, the U.S. steel industry witnessed some recovery in late 2019 on the back of an uptick in domestic steel prices.
Driven by consecutive price hike actions by major U.S. steel mills and supply-side actions, U.S. steel prices gained some traction in December. Shares of U.S. steel companies also gained some ground towards the end of 2019 on a recovery in steel prices, after getting hammered for the most part of the year. The de-escalation in trade tensions due to the announcement of the preliminary U.S.-China trade deal also provided a boost to shares of American steel makers. Most of the U.S. steel stocks ended 2019 in the positive territory.
However, the lethal coronavirus outbreak has dampened the recovery in the U.S. steel industry. Fears over the epidemic have triggered a broad-based selloff in U.S. steel stocks. Shares of major American steel makers such as United States Steel Corp. (X - Free Report) , Nucor Corporation (NUE - Free Report) , Steel Dynamics, Inc. (STLD - Free Report) and AK Steel Holding Corp have cratered roughly 30%, 27%, 22% and 30%, respectively, year to date. After gaining some upward momentum in December, U.S. steel prices also came under pressure over the past couple of months amid the coronavirus crisis.
Coronavirus has taken a heavy toll on China's economy. China is the world’s top consumer of steel. Demand for the commodity in China is expected to remain weak over the near term as the country struggle to cope with coronavirus. The epidemic has slowed down activities in the construction space (a major steel end-use market) in China as workers who returned from the Chinese New Year holidays were being quarantined. Coronavirus-induced panic is also hurting China’s already weakened automobile sector, another major end-market for steel.
Manufacturing activities in the country have also been disrupted due to the shutdowns imposed by the Chinese authorities. The demand environment for steel in China is not expected to get better anytime soon as economic activities in the country are likely to remain subdued through the first half of the year.
Nucor, Steel Dynamics and AK Steel each currently carry a Zacks Rank #3 (Hold), while U.S. Steel has a Zacks Rank #5 (Strong Sell).
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Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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U.S. Steel Imports Shoot Up in January, Drop Y/Y on Tariffs
U.S. steel imports dropped year over year in January, but shot up on a monthly comparison basis – according to the latest report from the American Iron and Steel Institute (“AISI”), an association of North American steel makers.
According to the AISI, total and finished domestic steel imports are down 9.9% and 33.4% year over year, respectively, in January to roughly 3.14 million net tons and 1.63 million net tons, respectively.
However, total and finished domestic steel imports surged 97.7% and 20.4%, respectively, from December 2019. The AISI noted that these figures are based on preliminary Census Bureau data.
Finished steel import market share was 17% for the reported month. For December, finished steel import market share was estimated at 15%.
The surge in import on a monthly comparison basis was partly due to a significant spike in imports from Brazil.
President Trump, in early December 2019, announced that he is restoring tariffs on steel and aluminum imports from Brazil and Argentina. Trump accused these countries of devaluing their currencies which hurt American farmers. The White House had exempted these two countries from the tariffs in 2018 as they continued to negotiate over trade terms. However, the Trump administration later in December backtracked on its decision to reimpose tariffs on Brazilian imports. Brazil is a major exporter of steel to the United States. Tariffs on Argentine steel was also not being enforced.
Per the AISI, the biggest offshore suppliers for January were South Korea with 182,000 net tons (up 8% from December), Brazil with 88,000 net tons (up 579%), Japan with 76,000 net tons (up 14%), Spain with 55,000 net tons (up 79%), and Turkey with 51,000 net tons (up 606%).
Section 232 Tariffs Drive Y/Y Fall in Imports
Notwithstanding the sequential rise in January, imports for the month were still down year-over-year largely reflecting the impact of the 25% tariff on steel imports which the Trump administration had levied in 2018 under Section 232 of the Trade Expansion Act of 1962.
The Trump administration, in March 2018, imposed steep tariffs on steel and aluminum imports, defying a wave of criticism and threats of counter-measures from major foreign trade partners. The tariffs, which have made imports more expensive, are approaching the end of their second year.
The tariffs are aimed at rescuing the domestic steel and aluminum industries which had long been reeling under the onslaught of cheap imports and has suffered significant reduction in production and employment. They are, in particular, targeted at countries with which the United States has significant trade deficits.
While the tariffs on steel imports badly hit certain major industries including automotive that are key consumers of steel, they provided the long-struggling U.S. steel industry a much-needed shot in the arm. The tariffs boosted production capacity of U.S. steel producers amid lower imports. They have helped U.S. steel industry capacity break above the important 80% level – the minimum rate required for sustained profitability of the industry.
U.S. steel imports fell roughly 15% in 2019 as a result of the tariffs despite complete exemptions of Canada and Mexico, two major sources of steel imports to the United States. The United States, in May 2019, reached a deal to lift steel and aluminum tariffs from Canada and Mexico. These major trade partners have long been pushing the Trump administration to repeal the tariffs. The deal paved the road for the ratification the new United States-Mexico-Canada Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA).
Coronavirus Dampens U.S. Steel Industry’s Recovery
The U.S. steel industry bore the brunt of a sharp decline in domestic steel prices in 2019. A slump in steel prices and lower demand for the commodity amid the global slowdown hurt bottom lines of U.S. steel companies through the first three quarters of 2019. However, the U.S. steel industry witnessed some recovery in late 2019 on the back of an uptick in domestic steel prices.
Driven by consecutive price hike actions by major U.S. steel mills and supply-side actions, U.S. steel prices gained some traction in December. Shares of U.S. steel companies also gained some ground towards the end of 2019 on a recovery in steel prices, after getting hammered for the most part of the year. The de-escalation in trade tensions due to the announcement of the preliminary U.S.-China trade deal also provided a boost to shares of American steel makers. Most of the U.S. steel stocks ended 2019 in the positive territory.
However, the lethal coronavirus outbreak has dampened the recovery in the U.S. steel industry. Fears over the epidemic have triggered a broad-based selloff in U.S. steel stocks. Shares of major American steel makers such as United States Steel Corp. (X - Free Report) , Nucor Corporation (NUE - Free Report) , Steel Dynamics, Inc. (STLD - Free Report) and AK Steel Holding Corp have cratered roughly 30%, 27%, 22% and 30%, respectively, year to date. After gaining some upward momentum in December, U.S. steel prices also came under pressure over the past couple of months amid the coronavirus crisis.
Coronavirus has taken a heavy toll on China's economy. China is the world’s top consumer of steel. Demand for the commodity in China is expected to remain weak over the near term as the country struggle to cope with coronavirus. The epidemic has slowed down activities in the construction space (a major steel end-use market) in China as workers who returned from the Chinese New Year holidays were being quarantined. Coronavirus-induced panic is also hurting China’s already weakened automobile sector, another major end-market for steel.
Manufacturing activities in the country have also been disrupted due to the shutdowns imposed by the Chinese authorities. The demand environment for steel in China is not expected to get better anytime soon as economic activities in the country are likely to remain subdued through the first half of the year.
Nucor, Steel Dynamics and AK Steel each currently carry a Zacks Rank #3 (Hold), while U.S. Steel has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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