US steel companies
US steel companies benefited from the Section 232 tariffs Donald Trump imposed in March. The spreads between US and international steel prices widened to record levels following the tariffs as it became costlier to import steel products into the United States.
Although US steel prices came off their highs in the second half of last year, the spike was good enough for Nucor (NUE) and Steel Dynamics (STLD) to report record earnings. U.S. Steel Corporation (X) and AK Steel (AKS) also reported higher earnings last year.
US steel companies had lauded the 25% tariff on US steel imports, which was even higher than what the US Department of Commerce had recommended, and US steel prices rose to a decade high following the tariffs. However, as the year progressed, falling Chinese steel prices took a toll on global and US steel prices (CLF).
Steel price spreads
US steel prices (SPY) tend to be a game of spreads. The basis for US and global steel prices is formed by prevailing steel prices in China. Also, US steel prices are generally higher than global steel prices. The spreads between US and global steel prices dependson several factors, including the domestic demand-supply situation.
Now, a year after the tariffs, while the US-global steel price spreads are still wide, Chinese steel prices have fallen. Could US steel companies, which long objected to Chinese steel overcapacity and allegedly subsidized exports, actually benefit from a US-China trade truce? We’ll explore these matters in detail in this series.