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Does U.S. Steel’s Turnaround Look Real This Time?

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Nov. 20 2020, Updated 2:50 p.m. ET

U.S. Steel’s turnaround

China exported 8.1 million metric tons of steel in November 2016, a fall of 16.0% YoY (year-over-year). Its exports fell 14.6% YoY in October. 

The country’s steel exports have fallen for four consecutive months. They fell ~1.0% in the first 11 months of 2016, compared to the corresponding period in 2015.

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Trade frictions

Global steelmakers have been up in arms against Chinese imports. After acting against direct Chinese steel imports, the U.S. Department of Commerce is now investigating transshipments of Chinese steel products from Vietnam.

The European Union has slapped anti-dumping duties on some Chinese steel products. India has extended the minimum import price for its steel products to fend off cheap Chinese steel from its borders. As outbound locations continue to dwindle for Chinese steel products, we’ve started to see some moderation in the country’s steel exports.

Long-term driver

Falling exports and sagging domestic demand could force China to cut its excess steel capacity. In our view, while Trump’s election is a key near-term driver for steelmakers (XME) (AKS) such as U.S. Steel Corporation (X), ArcelorMittal (MT), and Nucor (NUE), China’s capacity cuts, if they indeed happen, could be a long-term driver.

Investors will recall that earlier this year, US steel prices rose sharply after duties were imposed on flat rolled steel products. However, the abundance of cheap steel in international markets largely negated the impact of trade cases in 3Q16.

If China cuts its steel capacity, which it might have to do reluctantly, there could be better days ahead for the global steel industry. Turnarounds for U.S. Steel and other steelmakers could start to look much more possible following any potential capacity cuts.

You can visit Market Realist’s Steel page for ongoing updates on the industry.

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