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U.S. Steel Sinks Even as CEO Says Trump Won’t ‘Blink’ on Tariffs


Dec. 7 2018, Updated 2:46 p.m. ET

U.S. Steel

US steel stocks are in the red today, following the broader markets (DIA) lower. Looking at the leading steel names, U.S. Steel Corporation (X) and AK Steel (AKS) are trading at falls of 2.3% and 2.7%, respectively, as of 2:05 PM EST.

ArcelorMittal (MT) has fallen 1.8%, while Cleveland-Cliffs (CLF) is flat for the day.

Yesterday, in an interview, U.S. Steel’s CEO, David Burritt, praised President Donald Trump’s economic policies. Burritt also said that he believes Trump “will not blink” and hailed the “level playing field” following the tariffs.

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Section 232 tariffs

In March, Trump imposed a 25% tariff on US steel imports and a 10% tariff on aluminum imports. While the tariffs have lifted steel companies’ second- and third-quarter earnings, their price action has been dismal so far, with AK Steel and Steel Dynamics seeing fresh 52-week lows today.

What now?

Steel companies’ valuations look lower if not outright enticing. However, valuing cyclicals such as steel is a tricky exercise, as the steel industry’s earnings aren’t as linear as those of some others. US steel companies’ earnings should fall next year considering current spot steel prices. However, analysts’ 2019 earnings estimates don’t seem to have factored in the current downtrend in steel prices.

Having said that, unless we’re heading into a full-blown slowdown next year, steel stocks look to offer reasonable value now. Read Could Battered Steel Stocks Witness a Santa Claus Rally? for more on steel’s outlook.


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