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What to Expect from the US Steel Industry's Health in 4Q17

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What to Expect from the US Steel Industry's Health in 4Q17 PART 1 OF 9

Analyzing the US Steel Industry’s Health before 4Q17

US steel industry’s health

The US steel industry is having a weak year despite a presumably supportive Trump Administration. After the initial euphoria about President Trump’s infrastructure plans and tougher trade laws died down, investors’ appetite for steel stocks also fell. Most US steelmakers including U.S. Steel Corporation (X) and AK Steel (AKS) are trading with year-to-date losses. These stocks more than quadrupled last year as “Trump trade” lifted US steel stocks (XME).

Analyzing the US Steel Industry’s Health before 4Q17

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3Q17 guidance

Last week, Nucor (NUE), the largest US-based steel company, released its 3Q17 earnings guidance. The guidance was lower than the qualitative guidance provided by Nucor during its 2Q17 earnings call. Nucor’s 3Q17 earnings guidance was also lower than analysts’ expectations. Notably, it’s the second consecutive quarter that Nucor’s earnings guidance has fallen short of analysts’ estimates. You can read Nucor’s 3Q17 Guidance: Is It Losing Its Element of Surprise? to find out more about Nucor’s 3Q17 guidance. Steel Dynamics’ (STLD) 3Q17 guidance was also lower than expected.

Series overview

Steel companies’ lower-than-expected guidance raised doubts about the US steel industry’s health. In this series, we’ll look at some of the steel industry indicators to gauge the US steel industry’s outlook. Since the US steel industry is impacted by domestic and global factors, we’ll look at some of the key global economic indicators, especially China’s indicators. We’ll also look at the trend in raw material prices.

Steel prices are a key driver of steel companies’ earnings. In the next part, we’ll see how US steel prices look this month.

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