US steel stocks
Steel stocks fell sharply last year also. Cleveland-Cliffs (CLF), which supplies iron ore to US steel companies, is an exception. Its stock is up 22% this year.
Section 232 tariffs
It’s worth noting that despite the Section 232 tariffs President Trump imposed in March 2018, US steel stocks’ fortunes haven’t revived. U.S. Steel and AK Steel are trading far below the price levels they were at when the tariffs were announced. However, the tariffs and the subsequent rise in US steel prices helped Nucor (NUE) and Steel Dynamics post record earnings last year.
Despite the earnings rises, investors have given a miss to steel stocks, as is visible in their dismal price action. Several factors might be blamed for investors’ apathy toward the steel sector. US steel prices, which surged last year, have now fallen to levels we saw before the tariffs were imposed. There are also concerns that China’s slowdown put pressure on Chinese steel prices last year. The fall in Chinese steel prices generally echoes in steel prices elsewhere, as the country is the biggest steel producer, consumer, and exporter.
After the tariff announcement, US steel companies went on an investment spree and announced several new projects that would enhance US steel production capacity. Some observers see rising domestic steel production capacity as a bearish driver for US steel prices. Uncertainty over the longevity of the Section 232 tariffs has also hurt sentiments.