Steel industry woes
Previously in this series, we saw that U.S. Steel’s (X) share price has taken a beating on Wall Street over the last couple of months. The same is true for other steel companies, like Companhia Siderurgica Nacional (SID) and Timken Steel (TMST). The macro environment has been quite challenging for steel companies. A slowdown in global steel consumption, largely driven by China, has negatively affected the US steel industry.
On March 26, top executives of U.S. Steel, Nucor (NUE), and ArcelorMittal (MT) presented their case before a team of congresspeople from major steel-producing states. In particular, they briefed the congresspeople on the surge of steel imports in the United States.
Steel imports as a percentage of domestic consumption have reached alarmingly high levels. The chart above shows the increase in US steel imports. More steel imports have also negatively affected the performance of the SPDR S&P Metals and Mining ETF (XME). It’s ~35% invested in steel plays.
The Department Of Commerce (or DOC) had imposed anti-dumping duties on steel imports from several countries. One of the most important trade actions was the imposition of anti-dumping duties on “oil country tubular good” (or OCTG) products from Korea. The US International Trade Commission also ratified the DOC ruling. Steel imports, however, continue to increase.
A massive increase in steel imports has been the single biggest risk for the US steel industry. U.S. Steel faces challenges in its tubular segment also. The segment produces OCTG products. These products are used by the energy industry. Tenaris (TS) is also a leading supplier to the energy sector. In the next part of this series, we’ll discuss how U.S. Steel’s tubular segment faces turbulent times.