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US Steel Stocks in Line of Fire as Trump Takes on China

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President Trump

President Trump has hardened his stance on trade issues, threatening tariffs on billions of dollars of Chinese goods. Meanwhile, despite Trump’s efforts to protect US steel and aluminum producers, markets haven’t warmed up to these sectors. U.S. Steel Corporation (X), AK Steel (AKS), Century Aluminum (CENX), and Alcoa (AA) are trading with year-to-date losses. Let’s see what’s ailing these companies this year.

China factor

Globally, metal prices have come under pressure this year as investors gauge how the trade war could affect the Chinese economy. Since China is the largest consumer of metals like steel, aluminum, and copper, metals tend to be hyper-sensitive to any development related to China (FXI).

Falling steel prices in China, coupled with the country’s rising exports, could pressure global steel prices. As global steel prices fall, they could affect US steel prices as well. Despite the Section 232 tariffs, US steel markets aren’t a secluded island, and global developments could still affect the US steel pricing environment.

Section 232 uncertainty

After the sharp rise in US steel prices this year, the Commerce Department is investigating whether some market participants are “illegitimately profiteering” after the Section 232 tariffs. Domestic steel end users have been complaining of rising steel costs, and there have been reports of job losses in the downstream steel fabrication industry.

With increasing uncertainty over the sustainability of current US steel prices, investors have given steel stocks the cold shoulder. See Are President Trump’s Efforts to Save Steel Worth the Pain? for how the tariffs are affecting downstream steel users.

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