U.S. Steel Corporation’s bearish drivers
So far in this series, we’ve looked at U.S. Steel Corporation’s (X) bullish drivers. Wise investing warrants looking at the other side of the coin as well. In this part, we’ll look at some of U.S. Steel Corporation’s bearish drivers.
Trade war fears
The Section 232 tariffs have been far from amicable. Canada, Mexico, and the European Union have already retaliated after their Section 232 exemptions were not extended. Countries in NAFTA (North American Free Trade Agreement) are the biggest export destinations for US steel products (XME). Those countries are the largest steel exporters to the United States. According to the US Department of Commerce, NAFTA countries accounted for 88% of US steel exports last year. As Canada and Mexico retaliate against US steel imports, it could disrupt the region’s integrated dynamics.
As noted previously, US steel prices might now be near their cyclical peaks. Trade war fears are also expected to haunt the broader market valuations, with steel no exemption. According to some observers, record spreads between US and international steel prices could fuel imports of downstream steel products, hurting US steel demand.
But despite the challenges, the markets could still be getting a little bearish on U.S. Steel Corporation and some of the other steel companies such as AK Steel (AKS), Nucor (NUE), and ArcelorMittal (MT). Despite concerns over the health of the global steel industry amid escalating trade tensions, indicators point to underlying resilience. Read Checking in on the Global Steel Industry for a detailed analysis of global steel industry indicators.
You can also read Does the US Steel Industry Look Healthy This Month? for domestic steel industry indicators.