US steel imports
It would be interesting to go through any of the US steel companies’ earnings calls over the last four to six quarters. You’d find one thing in common. Steel executives have been regularly blaming the steep rise in US steel imports as the main reason for their woes.
Last year, top executives of United States Steel Corporation (X), Nucor (NUE), and ArcelorMittal (MT) presented their cases before members of Congress from major steel-producing states. They briefed them on the surge of steel imports into the United States.
US steel companies filed a series of trade cases last year to stem the flow of imported steel products into the United States. State support to steel mills in countries such as China and India has been cited often as a reason US steel companies are finding it hard to compete. It looks like steel companies aren’t wrong about pegging steel imports as their biggest challenge. US steel imports reached alarmingly high levels in late 2014 and continued to remain at elevated levels in 2015.
Rising steel imports have negatively impacted US steelmakers, including AK Steel (AKS) and TimkenSteel (TMST). The SPDR S&P Metals and Mining ETF (XME), which has invested more than half of its holdings in US-based steel companies, has also fallen, tracking the price action of steel companies. The graph above shows XME’s performance plotted against steel producers. NUE and STLD have outperformed XME since the beginning of 2015.
US steel companies have had their share of victories in their battle against alleged unfairly traded steel products. Preliminary duties have been imposed on three key steel product categories: hot-rolled, cold-rolled, and corrosion-resistant steel products.
Have the trade actions started to reflect in steel imports? In the coming parts of this series, we’ll analyze US January steel import data and explore the implications for steel company investors. In the next part, we’ll see if US steel imports have been rising or falling so far in 2016.