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Why the US Steel Industry’s 4Q17 Outlook Is Hazy

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US steel industry’s 4Q17 outlook

The US steel industry has seen significant volatility in the fourth quarter for the last three years. In 2014, OPEC’s (Organization of the Petroleum Exporting Countries) failure to reach a production cut deal triggered a sell-off in all of the risk assets. Global steel prices also fell in 4Q14. We saw another sell-off in steel stocks in 4Q15 as rising Chinese steel exports and fewer concerns in the world’s second-largest economy made investors bearish on metals and mining stocks (XME).

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Last year, we saw a sharp rally in US steel stocks in the fourth quarter. Notably, US steel prices were weak in October 2016. However, President Trump’s election triggered the steep rally in US steel stocks. Rising global steel prices, strong raw material prices, and expectations of higher growth and tougher trade laws under the Trump Administration made investors bullish on steel stocks. Companies like U.S. Steel Corporation (X) and AK Steel (AKS) more than quadrupled last year as investors found their lost love for steel stocks (CLF).

Series overview

Looking at steel companies’ 2017 price action, almost all US-based steelmakers including Nucor (NUE) are trading with year-to-date losses. In this series, we’ll look at the US steel industry’s 4Q17 outlook after a dismal performance in the first three quarters of the year. We’ll look at the outlook for US steel and raw material prices. We’ll also see how developments in China could impact the US steel industry’s 4Q17 outlook.

In the next part, we’ll look at the recent trend in US steel prices.

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