US steel stocks
US steel stocks are in the red today. As of 1:30 PM ET, U.S. Steel Corporation (X) and AK Steel (AKS) are respectively trading down 1.1% and 2.4%. Cleveland-Cliffs (CLF) and Nucor (NUE) are also down 0.59% and 0.13%, respectively. The S&P 500 (SPY) is down 0.61%. So what exactly has happened? Let’s see.
Today, the Turkish currency fell to record lows amid the country’s rising frictions with the United States. President Trump tweeted that he has authorized doubling the Section 232 tariffs on Turkey, which is among the largest steel exporters to the United States. The tariffs that cover most of the United States’ trading partners are otherwise 25% for steel imports and 10% for aluminum imports. Along with the Turkish currency crisis, tensions are also rising between the United States and Russia over sanctions on some of Russian entities.
Bears love it
Steel bears seem to be having a splendid time. Previously, bears targeted steel stocks after the amicable trade talks between China and the United States, assuming Chinese steel exports would be exempt from the Section 232 tariffs. More recently, steel stocks came under pressure after the friendly meeting between President Trump and European Union President Jean-Claude Juncker. Simply put: bears have targeted steel stocks on apprehensions that the Section 232 tariffs might be watered down.
On the other hand, steel stocks have also come under pressure whenever President Trump has raised the pitch in the trade war.
Its been a case of “heads: you lose—tails: you lose, too” for steel stocks. Despite US steel prices near a decade high, investors have shied away from US steel stocks on concerns over the Chinese economy and Section 232 exemptions.
Markets have already priced in several negatives for steel stock valuations. See The Steel Industry’s Midyear Review: Outlook Gets Murky to see what could drive US steel stocks in the second half of the year.