Why the US Steel Industry Is Hailing the New Trade Bill
New trade bill
On June 29, President Obama signed the Trade Promotion Authority bill. The passage of this bill was supported by the US steel industry. US Steel (X) CEO Mario Longhi was among the top executives who hailed the passage of this bill.
The new bill would make it easier for steel companies to file trade cases against dumped foreign steel products. Now, material injury to the US (IVV) industry cannot be denied if the industry is profitable. And rightly so, as steel executives claim that they should not have to go bankrupt before material injury is determined.
The new bill will provide more teeth to the US steel industry in filing trade cases. The law empowers the US Commerce Department to levy higher duties if the foreign steel companies don’t provide complete information.
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Steel imports as a percentage of domestic imports
The above chart shows the import penetration of steel mill products, excluding semi-finished steel. It tells you what percentage of domestic steel consumption is met with imported steel products. Last year, import penetration increased steeply, hurting steel companies like Nucor (NUE) and Steel Dynamics (STLD). These two companies form ~8.4% of the SPDR S&P Metals and Mining ETF (XME).
If the new trade bill could help the US steel industry to impose anti-dumping duties on cheap steel products, it would be a major positive indicator for the industry. Along with aiding domestic steel production, it could also support steel prices, which have corrected sharply this year. How could steel prices in the US play out in the coming months? We’ll explore this in the next part.