US steel stocks
Steel stocks have officially come off their early-2017 highs. While the year started off well for the US steel industry, we started to see weakness thereafter, though the Trump administration’s decision to order an investigation under Section 232 of the Trade Expansion Act of 1962 to see whether steel imports threaten US national security did provide some relief to steelmakers (XME).
Despite the initial euphoria, the investigation seems to have gone into cold storage. Meanwhile, US steelmakers are keeping the issue of rising imports alive, regularly slamming “unfairly” and “illegally” traded steel products during their earnings calls. Most recently, US steelmakers wrote a letter to President Trump, highlighting higher steel imports and requesting urgent action.
Almost all US-based steelmakers, including U.S. Steel (X), AK Steel (AKS), and Nucor (NUE), are trading with YTD (year-to-date) losses. However, ArcelorMittal (MT), which gets more than half of its revenues from Europe, has been strong this year.
Meanwhile, as some steel stocks like U.S. Steel rose sharply in August, some analysts have raised a red flag over valuations. (You can read The Curious Case of U.S. Steel’s Upgrades and Downgrades to analyze the arguments put forward by bullish and bearish analysts.)
In this series, we’ll do a comparative analysis of steel companies’ valuations, looking at various metrics to see how markets are valuing different steel companies.
We’ll begin in the next part (below) by looking at steel companies’ price-to-book-value ratio.