Steel Companies’ 2019 Outlook: Can the Winning Streak Continue?



Steel companies’ 2019 outlook

US steel companies are having a good run so far in 2019. Steel stocks that fell sharply last year have seen upwards price action in the first week of 2019. U.S. Steel (X) and AK Steel (AKS) have risen 13.5% and 19.5% YTD, respectively, based on their closing prices on January 8. Nucor (NUE) and Steel Dynamics (STLD), which seem to be set for record 2018 earnings, have seen an upwards price action of 6.6% and 9.6% so far. Cleveland-Cliffs (CLF), which supplies iron ore to US steel companies, is up 11.3%.

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Broader markets

So far steel stocks are outperforming broader equity markets (SPY). In December 2018, steel stocks hit their 52-week lows amid the plunge in broader markets. So, is the current uptrend sustainable, or are the gains a typical dead cat bounce that we see in beaten-down stocks? We’ll discuss this question in detail in this series. We’ll also do a detailed analysis of steel companies’ 2019 outlook, which could help us understand what lies ahead for the sector.

President Trump

Meanwhile, President Trump’s love for steel has continued in 2019 as well. Last year, Trump imposed tariffs on US steel imports that helped catapult US steel prices to multiyear highs. Now, Trump is proposing that the wall on the Mexican border could be made of steel, which could potentially lift US steel demand by ~3 million tons according to the American Iron and Steel Institute.


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