Why U.S. Steel’s Rally Might Not Be Over Yet



U.S. Steel’s rally

Previously, we looked at the bullish and bearish arguments put forward by analysts covering U.S. Steel (X). In this final article, we’ll analyze why the bullish argument could have more substance to it.

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Bullish argument

While US steel prices have been weak in the second half of the year for the last three consecutive years, there are no signs of a slowdown so far. On the contrary, steel mills have been recently pushing for price hikes. Companies including ArcelorMittal (MT) and Nucor (NUE) recently wrote a letter to President Trump regarding steel imports (XME) (STLD). While it’s too early to say whether the letter will have any impact on the ongoing Section 232 imports probe, in our view, it could help build positive sentiment in US steel markets.

There are several other factors that could support steel prices in the near term. Chinese steel prices have been strong despite many analysts projecting a demand slowdown in the second half of the year. We’ve also seen steel raw material markets firm up over the last month. Steel scrap, iron ore, as well as coking coal prices, have shown strength, which bodes well for steel prices. Furthermore, sentiments are bullish in the entire industrial metals space, which should support steel prices.

US steel prices

U.S. Steel’s near-term outlook looks bullish. However, we should remember that over the last three years, geopolitical and global factors have impacted US steel prices. While the sharp fall in crude oil prices pressurized steel in 2014, concerns over China’s slowdown amid record Chinese steel exports dented steel market sentiment in 2015. Last year, Donald Trump’s election saved the day for US steel prices as we saw a rally in all industrial metals.

We don’t know what surprise awaits US steel markets this year. However, you can stay updated on the relevant developments in the US steel industry by visiting our Steel page.


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