Cliffs and US steel imports
Since higher US steel imports negatively affect CLF’s customer orderbooks and pricing, it’s important for Cliffs investors to keep track of steel import penetration in the US market.
Imports rose for fifth consecutive month
US imports rose 30.5% year-over-year (or YoY) to 3.4 tons in March 2017. This marked the fifth consecutive month of rising imports. The rise came after imports fell 16.4% YoY in 2016.
The fall in imports in 2016 was mainly due to the filing of trade cases by US steel companies against unfairly traded steel. This move led to very high duties being imposed on unfairly traded steel products, leading to falls.
The estimated market share of imports in the US steel market was 28% in April 2017. Cliffs’ CEO, Lourenco Goncalves, said during the Goldman Sachs (GS) conference on November 16, 2016, that the goal was near 80.0%.
A rise in market share could provide much-needed pricing power to US steelmakers (SLX).
Steel imports probe
While imports have again started inching up in 2017, the US Department of Commerce has initiated a Section 232 investigation into the impact of steel imports on national security. Cliffs Natural Resources issued a press release on April 20, 2017, to support this investigation.
US steelmakers such as U.S. Steel Corporation (X), AK Steel (AKS), and ArcelorMittal (MT) have praised President Donald Trump’s call for this probe into steel imports and their implications on national security. If this investigation proves fruitful, better days could be ahead for the above-mentioned steelmakers and Cliffs.
In the next part of this series, we’ll take a look at the recent trend in US steel production and capacity utilization.