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How Do Falling US Steel Imports Impact Cliffs’ US Volumes?

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Nov. 20 2020, Updated 2:27 p.m. ET

Cliffs and US steel imports

Cliffs Natural Resources’ (CLF) USIO (US Iron Ore) segment mainly sells iron ore to integrated steel companies in the United States and Canada. Higher US steel imports, in turn, impact the order book as well as pricing for these companies negatively. For this reason, it’s important for Cliffs’ investors to keep a track of the steel import penetration into the US market.

Cliffs Chief Executive Officer Laurenco Goncalves mentioned during the Goldman Sachs (GS) conference on November 16 that the percentage of domestic steel on the market is still close to 70%. The goal, he said, should be in the 80% range.

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Imports fell in October

According to the data released by the US Census Bureau, US imported 2.4 million metric tons of steel products in October. This implies a YoY (year-over-year) fall of about 11%.

This also marks the third consecutive month that the steel imports have fallen after hitting a one-year high in July. Lower steel imports are positive for US steel producers (SLX) such as U.S. Steel (X), ArcelorMittal (MT), Nucor (NUE), and AK Steel (AKS).

Impact of trade cases

As the US companies filed several trade cases against unfairly traded steel into the US, the duties on importing steel were significantly increased. This minimized the incentive for US steel buyers to look for import of steel products.

Still, there are countries like Vietnam, from which there was a substantial increase in imports. Steel producers are alleging that Chinese steel is getting rerouted through other countries to evade higher duties. They’ve also filed a case to stop these imports. Any positive ruling on these cases should be a further positive for the US steel producers as well as for Cliffs.

In the next part, we’ll look at the recent trend in US steel production.

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