U.S. Steel Corporation
U.S. Steel Corporation (X) is having a dismal run in 2018. The stock has lost 15.3% year-to-date based on the closing prices on September 18. AK Steel (AKS) has lost 17.3% YTD, while Nucor (NUE) has risen 2.3%. Cleveland-Cliffs (CLF) has outperformed US steel stocks (XME) in 2018 with gains of 69.2%. Let’s see what could drive U.S. Steel Corporation’s performance in 2019.
U.S. Steel Corporation should benefit from higher steel shipments in 2019 due to incremental shipments from its Granite City facility. U.S. Steel Corporation could increase its 2019 flat-rolled steel shipments by double digits next year if the demand stays strong. Currently, US steel imports have fallen more than 10% in 2018. We might see US steel imports drop a little more next year if the Trump Administration goes ahead with quotas on steel imports. The demand side of the equation looks reasonably strong, which could mean higher steel shipments for U.S. Steel Corporation next year.
Although steel prices might have peaked and have come off their 2018 highs, they’re still holding onto most of their 2018 gains. Although we could see US steel prices taper down more, U.S. Steel Corporation’s 2019 earnings should still be aided by higher contract pricing in some of its annual supply contracts. The possibility of a sharp correction in US steel prices, which markets seem to factor in valuing US steel stocks, looks fairly dim at the moment.
AK Steel could also benefit from higher contract pricing in 2019, which we’ll discuss in the next part.