Outlook for US steel
We might have to wait a while before we get the final findings of the Section 232 imports probe that was ordered by the Trump administration. Since the Section 232 investigation could have a considerable impact on US steel markets, there’s been a wait-and-watch attitude from both buyers and sellers. The probe findings are now delayed, so let’s see how that could impact stocks such as U.S. Steel (X), AK Steel (AKS), and ArcelorMittal (MT).
The US steel market seems to be strong despite the delay in the Section 232 investigation. Steel demand growth looks decent despite the slight slowdown in auto sales. Supply chain inventories are at a lower level, which bodes well for US steel prices.
While Chinese steel prices are correlated with seaborne iron ore prices (CLF), US steel prices are typically influenced by scrap prices. US steel scrap prices have been strong, which could support spot steel prices in the short term. Both Nucor (NUE) and Steel Dynamics see stable scrap pricing in the second half of 2017.
Second half of the year
US steel prices have seen a sharp downward correction in the second half of the year for two consecutive years now. Some observers expect some softening in US steel prices in the coming months as we enter a seasonally weak demand period. In our view, as things stand currently, there’s little to suggest any major correction in spot steel prices in the remaining part of 2017. Having said that, steel market conditions tend to be volatile, and investors need to monitor the dynamics regularly.
Meanwhile, there are several upside and downside risks for US steel prices. In the next part, we’ll look at the upside potential for US steel prices in the coming months.