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US Steel Companies Are Making Hay while the Sun Shines

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Feb. 18 2019, Updated 3:22 p.m. ET

US steel companies

Last year was quite a happening one for US steel companies (CLF) (SPY). In March, US President Donald Trump imposed a 25% tariff on US steel imports, fulfilling his electoral pledge of protecting US steel jobs.

A 10% tariff was also imposed on US aluminum imports. The tariffs were imposed under Section 232 of the Trade Expansion Act of 1962 after the US Department of Commerce’s investigation found that steel and aluminum imports were a threat to US national security.

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Steel prices

US steel prices jumped to a decade high in the first half of 2018 as the spread between US and global steel prices widened as a result of the tariffs. The global economy was also looking strong in the first half of the year, providing a further impetus to US steel prices. 

However, US steel prices fell sharply in the fourth quarter. Concerns over global economic growth led to a slide in global and Chinese steel prices, which had repercussions for US steel prices as well.

Earnings surged

Nonetheless, margin expansion in the first half of the year helped propel US steel companies’ earnings. Nucor (NUE) and Steel Dynamics (STLD) posted record earnings and shipments last year. U.S. Steel Corporation (X) and AK Steel (AKS) also reported year-over-year rises in their 2018 earnings. Read Steel Companies’ Q4 Earnings: Gains and Losses for a comparative analysis of steel companies’ fourth-quarter earnings results.

Meanwhile, it’s important to know how US steel companies utilized their tariff windfalls last year. In this series, we’ll see how US steel companies utilized higher cash flows in 2018 and discuss the implications for investors.

Let’s begin by looking at steel companies’ 2018 cash flows in the next article.

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