As noted in the previous part, US steel imports have risen sharply in the last two months despite President Trump imposing the Section 232 tariffs. Looking at product specific action, rebar imports more than doubled last month. Nucor (NUE) is investing in new rebar capacity. Earlier this year, Commercial Metals Company (CMC) acquired some of Gerdau’s (GGB) US rebar mills.
Notably, the industrial sector has lagged some of the other sectors in 2018. The SPDR Dow Jones Industrial Average ETF (DIA) is trading flat for the year. DIA has underperformed most of the broader market ETFs in 2018.
In the flat-rolled space, HRC (hot-rolled coil) imports rose more than 44% YoY (year-over-year). HRC imports have risen more than 40% YoY for three consecutive months. The imports in April were the highest level since July 2016. US HRC prices have risen sharply this year. While higher prices lowered the HRC-CRC (cold-rolled coil) spreads in US markets, there were higher spreads between US and international HRC prices.
Galvanized steel and CRC imports also rose on a yearly basis last month. AK Steel (AKS) has a high percentage of CRC and galvanized steel in its product mix. Meanwhile, OCTG (oil country tubular goods) imports fell on a yearly basis. However, the imports rose on a sequential basis. U.S. Steel Corporation’s (X) Tubular segment produces OCTG products.
Have tariffs failed?
Have President Trump’s steel tariffs failed US steel companies? Imports have risen sharply since the tariffs were finalized. Well, not exactly. However, the US still needs to negotiate quotas with exempt countries. In the absence of quotas, US steel imports could stay at elevated levels.
Next, we’ll see how the Section 232 exemptions could play out.