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CLF: US Steel Imports Rose 19% Year-to-Date—Respite in Sight?

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Cleveland-Cliffs and US steel imports

The US (DIA)(DOW) iron ore segment contributes to most of Cleveland-Cliffs’ (CLF) revenues. Domestic US steelmakers are the main customers for this segment’s iron ore pellets.

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Imports rose in October

Steel imports into the United States (DIA)(DOW) continued to grow unabated in October, making it the twelfth consecutive month of rising year-over-year (or YoY) imports. The United States imported 3.1 million tons of steel in October. On a monthly basis, however, imports remain relatively flat.

According to the American Iron and Steel Institute (or AISI), the market share of imported steel in October was 27%, similar to September. It’s still higher than the 20% level, which most market participants consider normal.

In the first ten months of the year, imports are up 19.4% compared to the same period last year. Year-to-date, steel imports in the United States have remained strong, partly because of the anticipated decision on the Section 232 probe.

Notably, Steel Dynamics (STLD) and Nucor (NUE) have pointed to the higher imports during their 3Q17 earnings calls.

At the beginning of December, the Commerce Department—in a preliminary ruling—slapped hue import duties on Vietnamese steel products made with imports from China. This judgment saw steel names such as U.S. Steel (X) and AK Steel (AKS) surging 6.4% and 5.5%, respectively.

Section 232 probe

As investors might recall, the Trump administration ordered a probe into US steel imports under Section 232 in April 2017. This probe was ordered to determine if cheap steel imports pose a threat to national security. While the deadline for the probe was mid-January 2018, the Trump administration was determined to come up with a decision early. Several other factors, however, have delayed the highly anticipated decision. Steelmakers are now looking forward to the deadline date for a decision. A favorable decision would go a long way in reducing subsidized steel imports, which would be favorable for US steelmakers as well as CLF.

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