AK Steel (AKS) has been among the worst-performing steel stocks (MT) (STLD) in 2017 with year-to-date losses of more than 46% as of May 17. While other steelmakers have also seen selling pressure in May amid deteriorating global macros, AK Steel has been on a losing spree since the beginning of the year. Let’s look at the different factors that are driving down AK Steel.
Falling car sales
Falling US auto sales are a major risk for AK Steel investors given the company’s high exposure to that market. US auto sales have fallen year-over-year in the first four months of 2017, and most analysts expect US car sales to be lower in 2017 compared to the previous year. Furthermore, AK Steel’s commentary on average selling prices didn’t go down well with investors.
Meanwhile, despite the projected decline in US auto sales, AK Steel still expects its 2017 auto shipments to be similar to 2016, as the company is hopeful that it can increase its market share.
Waning Trump effect
After falling auto sales, the waning Trump effect has hit AK Steel and other steelmakers like U.S. Steel (X) and Nucor (NUE). Steel stocks staged a valiant comeback last year after Trump’s election on expectations of higher demand and protectionist trade policies.
To be fair, Trump has ordered a national security probe into steel imports, which could alter the US steel industry’s competitive landscape. Having said that, it wouldn’t be easy for the Trump administration to impose a blanket ban on steel imports. You can read Steel Companies Celebrate Trump’s Inquiry into Steel Exports to explore this in detail.
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