US steel industry
The US steel industry has seen an increase in profitability this year as President Donald Trump’s Section 232 tariffs have raised US steel prices (DIA). Nucor (NUE) and Steel Dynamics (STLD) posted record earnings in the second quarter, and earnings are expected to rise even more in the third quarter.
U.S. Steel Corporation (X) and AK Steel (AKS) are also expected to post sequentially higher earnings in the third quarter. Read Steel Companies in Q3 2018: Earnings, Tariffs, and the Trade War for a detailed analysis of steel companies’ third-quarter guidance and estimates.
Imports have fallen
US steel imports have fallen, while domestic production has picked up pace after the tariffs. Everyone seems to want a piece of the pie since the US steel industry has shown signs of revival. President Trump has touted steel as one of his administration’s success stories. Last week in a tweet, Trump said “Our Steel Industry is the talk of the World. It has been given new life, and is thriving. Billions of Dollars is being spent on new plants all around the country!”
Rising cash flows
As for investors, the equity markets have largely ignored steel stocks, given the uncertainty of higher steel prices. They’re being rewarded in the form of capital returns. Both Nucor and Steel Dynamics have announced share buybacks this year as their cash flows have soared amid higher steel prices.
Steelworkers also want their share as labor contracts come up for negotiations. We’ll look at that in the next part.