The first anniversary of Section 232 aluminum and steel tariffs will happen later this month. Over the last year, there have been some changes in the tariffs. For instance, South Korea, Brazil, Argentina, and Australia managed to get long-term exemptions from the tariffs. However, the temporary exemptions for the European Union, Canada, and Mexico were eventually withdrawn. US President Donald Trump also authorized the doubling of tariffs on Turkey last year.
After the tariffs, we saw a fall in US steel imports. Barring April and October, US steel imports fell YoY in every month since March. The data is available only until November. Overall, US steel imports fell 10.6% YoY in the first 11 months of 2018. Falling steel imports coupled with reasonably strong domestic demand helped lift US steel production. US steel production rose 6.2% last year, outpacing the global steel production growth that increased 4.6% in the year.
US steel production has looked strong this year, and the domestic steel industry’s capacity utilization rate has improved. With the Section 232 tariffs, the Commerce Department aimed to increase the US steel industry’s capacity utilization rate above 80%.
The tariffs have also spurred investments, as earnings of companies like U.S. Steel (X), AK Steel (AKS), Nucor (NUE), and Cleveland-Cliffs (CLF) improved following the tariffs. Nucor and Steel Dynamics (STLD) actually posted record earnings last year.
In the next article, we’ll see how steel companies (SPY) have utilized higher cash flows.