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How Wall Street Sees Steel Stocks ahead of 4Q17

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Part 5
How Wall Street Sees Steel Stocks ahead of 4Q17 PART 5 OF 8

US Steel’s 2018 Outlook: Will President Trump Come to the Rescue?

U.S. Steel’s 2018 outlook

As we noted previously in this series, US steel prices have been strong this year and could remain resilient in 4Q17. Notably, US steel prices rose smartly last year as well. Thanks to higher steel prices, companies such as Nucor (NUE) and Steel Dynamics (STLD) posted spectacular results in 1H17. Supportive global factors and healthy domestic demand supported US steel prices in the last few quarters.

US Steel’s 2018 Outlook: Will President Trump Come to the Rescue?

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Better-than-expected Chinese demand, coupled with supply-side reforms1, lifted global steel markets this year. We also saw an uptick in raw material prices, which further boosted global as well as US steel prices (X). However, as things stand currently, we don’t see many triggers that could support a further upside in US steel prices next year. US steel companies might need some support from the Trump administration next year. Let’s discuss this issue in perspective.

Infrastructure investments

Trump’s proposed infrastructure investments boosted US steel stocks. Infrastructure investments boost demand for metals like steel and aluminum. However, so far, we don’t have much clarity on the infrastructure projects. US steelmakers would bank on Trump’s proposed infrastructure investments to boost US steel demand (AKS).

Further, US steelmakers could expect some sort of imports protection under the ongoing Section 232 probe. Notably, US steel imports have been on the rise, as you can see in the chart above. If US steelmakers try to raise their selling offers, they could widen the arbitrage between US and international prices. In the absence of stricter trade barriers, US steel companies might not find it easy to raise steel prices next year.

In the next part of this series, we’ll see how analysts are rating ArcelorMittal (MT).

  1. The country shut down some of its polluting steel capacity.
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