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Steel Investors: Will Sticky Imports Outweigh the Trump Effect?

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Nov. 28 2016, Updated 3:04 p.m. ET

Sticky imports

As we discussed in the previous part, we saw an increase in US steel imports in some product categories where price arbitrage is still substantial between US and international prices. Meanwhile, markets expect Donald Trump to act against steel imports during his tenure. Trump mentioned steel in several of his speeches before the presidential election. He also mentioned steel in his recently released video. Trump’s stance on protecting US steelmakers from the onslaught of foreign-made steel caused several analysts to upgrade steel stocks (STLD) this month.

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Demand could improve

Trump might be able to stimulate US steel demand with his infrastructure push. Since we can presume, given Trump’s campaign claims and emphasis on boosting US manufacturing, that the steel used in any new public infrastructure projects would be US-made, companies like U.S. Steel Corporation (X), AK Steel (AKS), ArcelorMittal (MT), and Nucor (NUE) should benefit from Trump’s higher infrastructure outlay.

Imports are a different story

Can Trump bring down steel imports amid fears of retaliation from US trading partners? We should also remember that some of the trade actions that the US imposed on steel imports have been challenged in the World Trade Organization.

Another aspect to consider would be the impact of trade duties on end users. Earlier this year, US flat-rolled steel prices rose more than 70% after trade duties were imposed on imports from countries like China and Korea. Any clampdown on steel imports—even if it’s positive for the domestic steel industry—would have a negative impact on steel end users.

In the next part, we’ll look at global steel production data.

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