Will 2018 Mean Déjà Vu for US Steelmakers?



US steelmakers

Steel prices are the key driver of steel companies’ profitability. Looking at the last few years, we’ve seen an element of seasonality in steel prices (CLF). For instance, steel prices tend to be strong in the first half of the year on strong domestic demand and inventory restocking. However, in the second half of the year, we’ve seen weakness in steel prices as steel demand tends to be seasonally low in the second half.

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There have also been some aberrations in this trend. For instance, in 2015, steel prices were weak throughout the year. In 2016, steel prices continued their downward momentum from 2015. However, prices then rose sharply. Although the typical second half seasonality was visible in 2016 as well, Donald Trump’s election turned out to be a gamechanger for US steel prices. Although other factors—like rising raw material prices and higher Chinese steel prices—also supported US steel prices toward the end of 2016, Trump’s election was likely the key trigger.


Last year also, we saw seasonality in US steel prices. While steel prices showed strength in the first half of the year, they were subdued in the third quarter. Interestingly, while US steel prices were weak in 3Q17, they were largely stable in other major economies. In 4Q17, US steelmakers including U.S. Steel Corporation (X), Nucor (NUE), and AK Steel (AKS) vigorously pushed for price hikes. After the initial uncertainty, some of the hikes managed to hold their ground as the year drew to a close.

US steel producers’ price action also more or less followed spot steel prices (MT). Looking at 2018, we see that steel prices, as well as steel companies’ stock prices, have shown good momentum. Now, the question here could be: will we see the typical second half seasonality this year as well? We’ll discuss this outlook in detail in the next parts of this series.


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